There are some headwinds slowing the housing recovery, including low inventories, prices out of reach for some and tight credit.
But the home improvement component of the market, measured by the dollars consumers spend to update their homes, should remain strong into the first quarter of 2015, according to the Leading Indicator of Remodeling Activity (LIRA) released Thursday by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.
Growth in home improvement activity is expected to peak during the second half of 2014, and then begin to ease heading into next year, LIRA indicates.
Revised estimates from the U.S. Census Bureau show the home improvement market grew 5.6 percent in 2013. For 2014, the LIRA projects annual gains in home improvement spending of 9.9 percent, with annual growth slowing to 7.0 percent in the first quarter of 2015.
“With the economy improving slower than expected and home sales struggling to keep up with last year’s pace, the recent strong gains in remodeling spending will likely moderate later this year,” says Chris Herbert, Research Director at the Joint Center. “Although this presents a challenge for the remodeling industry, the LIRA continues to project significant growth going into 2015.”
The rest of the housing market is giving mixed signals.
Existing home sales climbed 2.6 percent to a seasonally-adjusted annual rate of 5.04 million in June, the highest pace since October 2013. But the Commerce Department this week reported that new home sales for June plummeted by 8 percent.