Home remodeling activity is expected to cool down considerably in 2020 as the economy slows.
Gains on home improvement and repair spending are projected to continue to decline through early next year, according to the latest from the Joint Center for Housing Studies of Harvard University.
The center’s Leading Indicator of Remodeling Activity, or LIRA, index predicts homeowner remodeling spends will fall from the current 7% to 2.6% in the first quarter of 2020. This is well below the historical average of 5%, the report points out, and a low the market hasn’t seen since 2013.
Chris Herbert, the center’s managing director, said a slowdown in home-price growth, homes sales activity and remodeling permitting are lowering the expectations for improvement and repair spending.
It seems the impact of these factors is not lost on home remodelers, who reported a three-point decline in confidence in the first quarter of this year, according to a recent report from the National Association of Home Builders.
Still, NAHB said that, at 54, its Remodeling Market Index remains above 50, which indicates that remodelers believe activity is solid.
NAHB Chief Economist Robert Dietz said the index suggests the market will slow.
“NAHB's forecast calls for slowing growth, given declining home price appreciation and existing home sales volume, combined with rising construction costs,” Dietz said.
Herbert said that while a decline is evident, the current rate environment might help turn things around.
“More favorable mortgage rates could still give a boost to home sales and refinancing this spring and summer, which could help buoy remodeling activity,” he said.