CAMBRIDGE, MA — Annual growth in homeowner spending for improvements and repairs is expected to soften during the first half of 2023, even as the market continues its upward trajectory, according to the latest in a series of quarterly reports issued by the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University.
According to the Joint Center’s Leading Indicator of Remodeling Activity (LIRA), released this summer, year-over-year gains in remodeling expenditures to owner-occupied homes are projected to decelerate from 17.4% in 2022 to 10.1% by the second quarter of 2023.
While beginning to soften, however, growth in spending for home improvements and repairs is nevertheless expected to remain well above the market’s historical average of 5%, according to Harvard economists, who forecast annual remodeling expenditures to increase to nearly $450 billion by the first half of next year.
“Slowing sales of existing homes, rising mortgage interest rates and moderating house price appreciation are expected to dampen owners’ investments in home improvements and maintenance over the coming year,” said Carlos Martín, project director of the Remodeling Futures Program at the Cambridge, MA-based Joint Center.
“Steep slowdowns in homebuilding, retail sales of building materials, and renovation permits all also point to a cooling environment for residential remodeling,” Martin added.
In related remodeling market news:
- Although most remodelers across remain bullish about the market, a growing number are “starting to experience symptoms of a slowdown,” the National Association of Home Builders reported.
Twenty-one percent of surveyed remodelers said the market had gotten worse in the second quarter of 2022, compared to only 11% who said it had gotten better, according to the NAHB. This is the first time the “worse” has exceeded the “better” percentage since the first quarter of 2020 (the quarter of the onset of the pandemic), the Washington, DC-based trade association noted.
“Some customers are showing a reluctance to go forward with projects due to the higher costs and delays associated with material shortages, as well as higher interest rates,” observed NAHB Remodelers Chair Kurt Clason.
- Expectations for continued home remodeling demand are being tempered as homeowners – facing inflation, interest rate hikes and other uncertainties – reportedly await signs of national economic stability, according to the latest in a series of quarterly reports by Houzz, the Palo Alto, CA-based platform for home remodeling and design.
“Following the strong residential remodeling and design activity of the past two years, it’s unsurprising that businesses are leveling their expectations as current economic conditions now impact both sides of the industry,” said Marine Sargsyan, staff economist for Houzz.
“Rising interest rates and inflation have put downward pressure on homeowners’ demand for professional services in the short term, giving pros an opportunity to clear up lengthy backlogs,” Sargsyan observed. “That said, homeowners managing the demands of aging housing stock and housing market shortages will continue to drive home renovation and design activity in the long run.”