Harvard predicts remodeling upturn in 2010

CAMBRIDGE, Mass. -- Homeowner improvement spending is likely to reach a cyclical bottom in the current quarter and steadily increase through 2010 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 projects annual declines in home improvement spending will ease from the current rate of 12.0 percent to 3.1 percent in the third quarter of 2010.

“It appears we may be near the bottom of the current remodeling cycle,” says Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “With signs of stabilization in the national economy, homeowners are once again planning home improvement projects.”

Remodeling industry fundamentals are generally beginning to turn positive. “Sales of existing homes are on the rise and home price declines are moderating in most markets across the country,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies. “Financing costs are also favorable, although credit availability remains tight for many households.”

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. The development of the LIRA is detailed in “Developing a Leading Indicator for the Remodeling Industry” (JCHS Research Note N07-1). In July 2008, the LIRA was re-benchmarked due to changes in the underlying reference series. These changes are explained in “Addendum to Research Note N07-1: Re-Benchmarking the Leading Indicator of Remodeling Activity” (JCHS Research Note N08-1). 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. The next LIRA release date is April 15, 2010.

The Remodeling Futures Program, initiated by the Joint Center for Housing Studies in 1995, is a comprehensive study of the factors influencing the growth and changing characteristics of housing renovation and repair activity in the United States. The Program seeks to produce a better understanding of the home improvement industry and its relationship to the broader residential construction industry.

The Joint Center for Housing Studies is Harvard University’s center for information and research on housing in the United States. Established in 1959, it is a collaborative unit affiliated with the Graduate School of Design and the Harvard Kennedy School. The Joint Center analyzes the dynamic relationships between housing markets and economic, demographic, and social trends, providing leaders in government, business, and the non-profit sector with the knowledge needed to develop effective policies and strategies. For more information, please visit www.jchs.harvard.edu.

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