Remodeling Outlook Wavers as Challenges Mount
Growth in remodeling is fine, for now. But annual growth in the national market for home improvement and repair is expected to slow considerably by the end of the year, according to the Leading Indicator of Remodeling Activity from the Joint Center for housing Studies of Harvard University.
The LIRA now projects gains in renovation and repair spending to owner-occupied homes in the U.S. will shrink from 7.5 percent in 2018 to 5.1 percent in 2019.
“Slowing house price appreciation, flat home sales activity and rising mortgage interest rates are deflating owners’ interest in making major investments in home improvements this year,” said Chris Herbert, Managing Director of the Joint Center for Housing Studies. “Continued slowdowns in homebuilding, sales of building materials, and remodeling permits all point to a more challenging environment for home remodeling in 2019.”
Abbe Will, Associate Project Director in the Remodeling Futures Program at the Joint Center, said despite growing headwinds, improvement and repair spending is still set to expand this year to more than $350 billion. “But after several years of stronger-than-average increases, the pace of growth in remodeling activity is expected to fall back to the market’s historical average annual gain of 5.2 percent,” She said.
Meanwhile, the National Association of Home Builders’ Remodeling Market Index slowed slightly to 57 in the fourth quarter, only one point lower than the previous quarter. The NAHB outlook is more optimistic, noting the index has held consistently above 50–indicating more remodelers report market activity is higher compared to the prior quarter than report it is lower–since second quarter 2013.
Nonetheless, “The overall remodeling market remains strong, but there are signs of concern related to rising labor and input costs,” said NAHB Remodelers Chair Joanne Theunissen. “Remodelers are battling sticker shock with many home owners who expect lower bids.”
The report said among its three major components, major additions and alterations remained steady at 56, minor additions and alterations decreased one point to 56 and the home maintenance and repair component fell one point to 59.
The future market indicators dropped three points from the previous quarter to 56. Calls for bids remained still at 57, the amount of work committed for the next three months decreased seven points to 52, the backlog of remodeling jobs fell three points to 59 and appointments for proposals decreased four points to 55.
“Many of the fundamentals for the remodeling market, including demographics and economic and employment growth, remain favorable,” said NAHB Chief Economist Robert Dietz. “However, remodelers continue to face challenges in keeping their prices competitive while dealing with the increasing costs of labor and building materials.”
