Study: Home Improvement Spending to Surge in Q4 2012 and Beyond

Spending on home improvements should reach almost $121 billion in Q4 of this year and surge to $134 billion by Q2 2013, according to Harvard's Leading Indicator of Remodeling Activity. That's up 21% from 2011 lows.

Study: Home Improvement Spending to Surge in Q4 2012 and Beyond
Q3 2012 spending on remodels. Click to enlarge.
Julie Jacobson · October 18, 2012

After a few years of really bad news in the housing sector, we can expect some major spending in home remodeling in Q4 of this year, with continued growth in 2013 (chart).

Q4 of this year should bring about $120.7 billion in spending on home improvements, according to a Leading Indicator of Remodeling Activity (LIRA) report released today by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.

That represents almost 6% more than the four previous quarters, each of which saw spending of around $114 billion to $115 billion.

It gets better. Spending will jump another 12.1% in Q1 2013 to nearly $129 billion, and soar 16.6% higher in Q2 2013 to $134.2 billion, according to LIRA. That’s 21.2% higher than the 2011 low of $110.7 billion.

Peak remodeling occurred between 2006 and 2007, at the height of the economic bubble, with spending between $139 billion and $146 billion. 

LIRA Statistics: Home-improvement spending from 1995-Q2 2013e (click to enlarge)

LIRA credits an improving housing market and record-low interest rates for driving the (predicted) gains in remodeling activity.

Typically, a heavy dose of home improvement accompanies the sale of new and existing residences as new owners settle in.

“Strong growth in sales of existing homes and housing starts, coupled with historically low financing costs, have typically been associated with an upturn in home remodeling activity some months later,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “While the housing market has faced some unique challenges in recent years, this combination is expected to produce a favorable outlook for home improvement spending over the coming months.”

RELATED: Housing Starts Surge 15% in September

Meanwhile, CE Pro’s own research indicates that home systems integrators are focusing more and more on the retrofit (remodel) market.

According to the most recent CE Pro statistics, 57% of residential revenues now come from existing homes vs. new construction. As recently as 2006, dealers reported that more of their revenue came from new home construction (52.6%) than from remodeling (47.4%) projects.

The good news in remodeling, not surprisingly, follows rosy numbers in new-home construction.

September 2012 saw the highest number of new housing starts in four years, up 15% over August to a seasonally adjusted annual rate of 872,000. Compared to last September, the number of starts is up 34.8 percent.

Single-family homes account for 69 percent of the new starts in September, up 11 percent to 603,000. That is the highest level for single-family homes since August 2008. Also, it’s an increase of 43 percent compared to September 2011. Multi-dwelling units (MDUs) rose 25.1 percent vs. August.

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  About the Author

Julie Jacobson, recipient of the 2014 CEA TechHome Leadership Award, is co-founder of EH Publishing, producer of CE Pro, Electronic House, Commercial Integrator, Security Sales and other leading technology publications. She currently spends most of her time writing for CE Pro in the areas of home automation, security, networked A/V and the business of home systems integration. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, earned an MBA from the University of Texas at Austin, and has never taken a journalism class in her life. She's a washed-up Ultimate Frisbee player currently residing in Carlsbad, Calif. Email Julie at [email protected]

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  Article Topics

News · LIRA · Remodel · Retrofit · All Topics
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