The extended easing of gains in residential improvement spending is expected to change course by early next year, according to the Leading Indicator of Remodeling Activity (LIRA) released last month by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects annual spending growth for home improvements will accelerate to 4 percent by the first quarter of 2016.

“A major driver of the anticipated growth in remodeling spending is the recent pickup in home sales activity,” said Chris Herbert, managing director of the Joint Center. “Recent homebuyers typically spend about a third more on home improvements than non-movers, even after controlling for any age or income differences, so increasing sales this year should translate to stronger improvement spending gains next year.”

“Other signals of strengthening remodeling activity include sustained growth in retail sales of home improvement products and ongoing gains in house prices across much of the country,” said Abbe Will, a research analyst in the Remodeling Futures Program at the Joint Center.  “Rising home prices means rising home equity, which should encourage improvement spending by a growing number of owners.”

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. The LIRA is released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University in the third week after each quarter’s closing.

Visit www.jchs.harvard.edu for more information.