CAMBRIDGE, Mass.– Renovation and maintenance spending are forecast to decline over the next year for the first time in a decade, according to the Leading Indicator of Remodeling Activity, an analysis developed by Harvard University’s Joint Center for Housing Studies.
Following years of 5% to 7% growth in spending since last decade’s housing crash, Harvard’s model has been predicting slower growth for the past year or so and an outright decline next year for the first time since 2010, reported MSNBC.com.
“Seeing this slowdown and decline into next year is certainly worrisome for the economy,” Abbe Will, associate project director for the Harvard’s Remodeling Futures Program, told MSNBC.
The index takes into account several economic indicators, including sales of existing homes, housing starts, residential remodeling permits and building-material sales compiled by the U.S. Census Bureau.
A ‘Good Barometer’
“Besides keeping the cash registers busy at hardware stores and lumber yards, remodeling activity is a good barometer of the housing market and consumer confidence,” the MSNBC analysis noted. “Home sellers usually spend to spruce up their houses before listing them, while buyers often renovate purchases. Homeowners staying put tend to embark on remodeling jobs when property values are rising because they are more likely to be able to borrow against the equity in their homes to pay for the work.”
As CUToday.info reported earlier, a number of factors, including limited supply, have helped to slow home sales, with the National Association of Realtors reporting last week sales of previously owned homes fell 2.2% in September from the previous month.
Corporate executives at companies that manufacture products in the home improvement category told MSNBC Harvard’s forecast didn’t worry them much, contending that it is driven by big-ticket spending.
Decline of 0.3%
“Some of the smaller projects like a painting of your kitchen or a painting of a bathroom, those tend to hold up maybe a little bit better in an environment like that.” said Jim Jaye, Sherwin-Williams’ head of investor relations.
Though the Harvard index, known as the LIRA, predicts annualized spending to decline just 0.3% by spring, the historical average is roughly 5% annual growth, MSNBC reported.