Re-benchmarked LIRA Declines

The weak economy and further distress in housing markets are impeding remodeling activity according to Harvard’s Joint Center for Housing Studies. The Leading Indicator of Remodeling Activity (LIRA) reports that homeowner improvement activity will continue to decline, falling by an annual rate of 11.1 percent by the first quarter of 2009.

This quarter’s LIRA report differs significantly from previous reports in that it takes into account only homeowner improvement activity and no longer factors in maintenance and repair activities, a significant segment of the remodeling market. Spending by homeowners on maintenance and repairs — as well as spending on improvements and maintenance and repairs for rental and vacation property — are no longer included in the LIRA figures.

The re-benchmarking was necessitated by the recent discontinuation of the U.S. Census Bureau’s Residential Improvements and Repairs Statistics, also known as the C-50 series. The LIRA now projects future trends in homeowner improvement activity based on the bureau’s C-30 series, which focuses on improvement spending only.

“The slumping economy and struggling housing sector continues to drag down spending on home improvements,” notes

Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “Households are reluctant to undertake major improvements in the context of falling prices.”

“Our re-benchmarked leading indicator focuses on homeowner improvements, and these projects have been particularly hard hit by the housing downturn,” remarks Kermit Baker, director of the Remodeling Futures Program of the Joint Center.

“Weak home sales and a growing inventory of unsold homes have discouraged upper-end remodeling activity in many areas.”

The improvement estimates of the C-50 and C-30 are fairly comparable since both studies draw from the same government survey, notes a recent JCHS newsletter. At the same time, the annual rate of change for the C-30 is less erratic than the C-50 because the Census Bureau uses smoothing and adjustment techniques to fit quarterly survey data to a monthly series.

The C-30, JCHS notes, appears to be somewhat more cyclical than the C-50 since “discretionary spending tends to be more volatile compared to the more routine and less costly expense of maintenance and repair activity.” |

Energy Solutions

More homeowners are turning to remodelers for money-saving solutions, according to the results of the National Association of Home Builders’ (NAHB) quarterly Remodeling Market Index (RMI). Thirty-three percent of surveyed remodelers report that they are increasingly called on to improve the energy efficiency of their clients’ homes.

According to the survey, remodelers have installed a number of efficiency-enhancing products in recent months, including:

• Windows: 73 percent of surveyed remodelers installed more energy-efficient windows that are insulated to prevent outdoor heat exchange.
  
• Insulation: 65 percent made upgrades such as insulation replacement and spraying foam or fiber insulation into enclosed walls and roof cavities, while 27 percent insulated foundations and 52 percent installed insulated exterior doors.
  
• High-efficiency HVAC systems: 56 percent
  
• High-efficiency kitchen appliances: 47 percent
  
• Water-saving faucets and fixtures: 46 percent

New Housing

Builder confidence in the market for newly built single-family homes fell for a third consecutive month in July, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI fell below its previous record low of 18 in June to a new record low of 16 in July, with each of its three component indexes also hitting record lows.