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Harvard Expects Slow But Steady Home Improvements
Despite weakness in house prices, growth in home improvement expenditures is expected to hold steady in the low single-digit range, according to the Leading Indicator for Remodeling Activity (LIRA) developed by Harvard’s Joint Center for Housing Studies.
Home owner spending for home improvement activity will essentially remain constant through the first quarter of 2008, with overall growth in spending for this year projected to be 3.0%.
“Home owners continue to draw on built-up equity in their homes to finance home improvements,” said Nicolas Retsinas, director of the Joint Center for Housing Studies. “However, the pace of spending remains moderate and tempered in the context of a very soft housing market.”
“Falling sales of existing homes and depressed remodeling contractor sentiment remain negative factors in the outlook for the industry,” said Kermit Baker, director of the Remodeling Futures Program of the Joint Center. “With borrowing costs remaining favorable, though, owners are still able to take advantage of the run-up in their house’s value over the past decade to finance home improvement projects.”
The LIRA is a new initiative from the Remodeling Futures Program to estimate future national remodeling activity with a horizon of three quarters.
Released last month, the index showed 2.4% growth in home-owner remodeling activity in this year’s second quarter on a four-quarter moving rate of change basis, or a total of $185.0 billion; and projected 2.4% growth for the third quarter ($185.3 billion); 3.0% in the fourth quarter ($183.1 billion); and 3.4% in the first quarter of 2008 ($186.8 billion).
The LIRA replaces the Remodeling Activity Indicator (RAI) previously released by the Joint Center and it is released quarterly in April, July, October and January during the third week following the end of each quarter.
The next release date is Oct. 18.
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