The rate of home improvement spending should increase in the beginning of 2016, researchers in the Remodeling Futures Program at Harvard’s Joint Center for Housing Studies have projected.
The program’s latest release of the Leading Indicator of Remodeling Activity, or LIRA, predicts that by the first quarter of next year, annual spending growth on home improvements will accelerate to 4%. Total spending for Q1 of 2016 is projected to be $146.4 billion.
That’s less than what the researchers think will be spent in the current quarter ($151.1 billion) and next quarter ($147.4 billion), but still represents a year-over-year gain of nearly $6 billion. Q1 of 2015 saw weak spending, just $140.7 billion.
Researchers say one major driver of the residential improvement industry is a higher rate of home sales. “Recent homebuyers typically spend about a third more on home improvements than non-movers, even after controlling for any age or income differences,” Joint Center Managing Director Chris Herbert explained in a July 16 news release, “so increasing sales this year should translate to stronger improvement spending gains next year.”
Retail sales of remodeling supplies and the general recovery of the real estate market also factor in, according to Abbe Will, a research analyst in the program. “Rising home prices means rising home equity, which should encourage improvement spending by a growing number of owners,” she said.
So what are homeowners spending their remodeling dollars on? A survey conducted by the National Association of Home Builders found that bathroom remodeling is far and away the most requested job in the U.S., accounting for almost eight out of 10 renovations. But some remodeling projects are far more modest, such as painting or other minor cosmetic work.
As the Wall Street Journal pointed out in its coverage of the latest LIRA reading, spending on home improvement projects has actually declined in the past five years (from an average of $6,200 per project in 2010 to $4,100 per project in 2015).
The good news, at least for the job market, is that more people are hiring outside contractors for remodeling projects, instead of attempting to tackle them on their own.