The Big Fix
Property owners as of late steadily set aside more money to fix up or revamp their houses, townhomes and condos.
The quarterly increases fluctuate between around 5 and 7 percent, a prominent researcher notes. But those gains are middling compared with costs expected to jump close to 8 percent by September, boosting total spending to $333 billion, according to the Leading Indicator of Remodeling Activity released in the fall by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.
According to Harvard, the LIRA projects that annual gains in home renovation and repair spending will increase from 6.3 percent in the fourth quarter of 2017 to 7.7 percent by the third quarter of next year.
“Recent strengthening of the U.S. economy, tight for-sale housing inventories, and healthy home equity gains are all working to boost home improvement activity,” says Chris Herbert, managing director of the Joint Center for Housing Studies in Cambridge, Massachusetts. “Over the coming year, owners are projected to spend in excess of $330 billion on home upgrades and replacements, as well as routine maintenance.”
“And while it’s too early for our LIRA model to capture the effects of recent hurricanes and other natural disasters experienced around the country, there is certainly potential for even stronger growth in remodeling next year as major reconstruction and repairs get underway in affected regions,” says Abbe Will, research associate in the Remodeling Futures Program at the Joint Center.
As recently as 2014, remodeling expenses added up to just more than $260 billion.
Based on the program's research, total remodeling spending has increased every three months since mid-2014, while the expected percentage rise dipped from 2014 to first quarter 2016 – when it bottomed out at a 4.6 percent increase. Spending jump peaked at 6.8 percent in first quarter of last year before sliding to 6.3 percent at the end of the year and then shooting up to an expected three-year rise of 7.7 percent by this summer.
The Leading Indicator of Remodeling Activity “provides a short-term outlook of national home improvement and repair spending to owner-occupied homes,” according to the housing studies center at Harvard. “The indicator, measured as an annual rate-of-change of its components, is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters, and is intended to help identify future turning points in the business cycle of the home improvement and repair industry,” it says.
Developed in 2007, the LIRA reset its benchmark in April 2016 “to a broader market measure based on the biennial American Housing Survey.”
The LIRA is released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University in the third week after each quarter’s closing.
The Remodeling Futures Program, started by the Joint Center for Housing Studies in 1995, looks at the factors influencing growth and changes in housing renovation and repair activity.
Visit www.jchs.harvard.edu.
Score of homeowners and many thousands of home improvement and design businesses take on home remodeling projects yearly. Personal finance groups post internet columns on the remodeling steps as well as what not do.
Go Banking Rates, an online site, recently listed the “11 expensive home-remodeling mistakes to avoid.”
The top trouble to keep away from is “not spending enough.” The other problems, in order, are “expecting to profit from remodeling, not getting permits, automatically going with the lowest bid, not ordering extra materials, disregarding little things, not having a contingency fund, not getting at least three bids, not getting details of the contractor’s quote, underestimating the cumulative effect of changes and not getting a contractor’s warranty in writing.”
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