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Slide in Home Improvement Spending Likely to Continue into Next Year

Jul 22, 2011 11:47 AM

After showing signs of recovery, spending on home improvements is expected to remain volatile and weak over the next several quarters, according to the Leading Indicator of Remodeling Activity (LIRA) released today by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA is projecting that annual remodeling spending through the first quarter of 2012 will be down 4.0%. The U.S. Census Bureau’s improvements spending series, to which the LIRA is benchmarked, was recently revised downwards as well.

“The recent slowdown in the economy has caused home improvement spending to weaken again,” says Eric S. Belsky, managing director of the Joint Center. “Falling consumer confidence levels have undermined interest in discretionary remodeling projects."

“What looked to be a promising upturn in home improvement spending earlier this year has begun to stall,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “Housing starts, existing home sales, and house prices have all been disappointing lately, which has dimmed prospects for home improvement spending gains this year.”

The Leading Indicator of Remodeling Activity (LIRA) is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. The indicator, measured as an annual rate-of-change of its components, provides a short-term outlook of homeowner remodeling activity and is intended to help identify future turning points in the business cycle of the home improvement industry.

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