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Homebuilders and remodelers can expect their businesses to grow modestly this year, according to a new estimate by Harvard University housing researchers.
The Joint Center for Housing Studies’ Leading Indicator of Remodeling Activity (LIRA) projects an uptick in year-over-year growth of home renovation and repair expenditure from 3.5 percent at the close of 2020 to 3.8 percent by year-end 2021, according to a forecast released last week.
“The remodeling market continues to benefit from a strong housing market—including accelerating growth in homebuilding, sales, and home equity,” JCHS managing director Chris Herbert said in a statement. “In addition to routine replacement and repair projects, homeowners are likely to pursue more and larger discretionary home improvements this year as the broader economy recovers.”
The LIRA indicator, measured as an annual rate-of-change of its components, is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters, and is intended to help identify future turning points in the business cycle of the home improvement and repair industry.
“With the release of new benchmark data from the American Housing Survey, we’ve raised our projection for market size in 2021 by about $4 billion, or 1 percent, to $352 billion,” JCHS Remodeling Futures Program director Abbe Will said in a statement. “Spending in 2018 and 2019 was slightly more robust than previously estimated, growing 12.8 percent over these two years compared to 11.5 percent as estimated.”
With thousands of Americans having bought new homes in the last year, and more expected in 2021 as interest rates stay low, the potential exists for an uptick in home renovation projects.
The National Association of Homebuilders reported last week that its members reported strong confidence in their local markets during a survey taken in the fourth quarter of 2020. In the Northeast, NAHB members surveyed in the fourth quarter of 2020 reported a slight uptick in confidence in the future of the regional market compared to the third quarter.
“The remodeling market was consistently strong throughout 2020, as home owners had more time on their hands to improve their homes and add space and efficiency,” NAHB Remodelers Chair Tom Ashley, Jr. said in a statement. “However, activity slowed a bit at the end of the year as a result of the rising COVID-19 cases and an increase in economic insecurity.”
NAHB’s economic forecast predicts GDP growth accelerating as the year rolls on and COVID vaccines become more widely available, the association’s chief economist Robert Dietz said.
