Home Improvement Spending Will Stay Strong but Level Out in 2015

The housing market still has a lot of recovering to do, and factors like high prices, tight credit and low housing inventory are creating a bit of a speedbump. The home improvement market, however, is a different story.

Home improvement growth is measured by the money homeowners spend on updating and upgrading their houses. The Leading Indicator of Remodeling Activity (LIRA) recently released by Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University predicts a strong first quarter for the home improvement market in 2015.

Though growth is expected to remain positive, growth rates will peak in the second half of 2014 and begin to level out a bit heading into 2015, slowing from 2014’s projected annual spending gain of 9.9% to 7.0% in the first quarter of 2015.

The lower numbers may be a result of slower-than-anticipated economic improvement and struggling home sales. Although this slowdown might provide a challenge for the home remodeling industry, LIRA still predicts significant growth in 2015, which is more than what can be said for the housing market.
“One of the main factors that homeowner’s contemplate when choosing to renovate their homes is their return on investment, and the increased value the improvement will have on their home,” says Gregg Buffington, President of Buff Exteriors LLC. “For exmaple, by putting a new architectural roof on their home, homeowner’s have found that it increases the total value of their home by 5%. If they have a designer shingle installed on their home, it increases the total value of their home by 6%.”

Sales for existing homes grew 2.6%, giving them the highest pace since October of 2013, but new home sales plunged 8% in June, reflecting a market that remains unstable. Many sectors of the housing market are still recovering from 2013’s increased interest rates, and dwindling supplies of properties for sale are alienating new buyers and driving up prices.

Inversely, the United Kingdom home building and buying market is experiencing a Renaissance that has yet to be felt by home improvement contractors. In spite of a remarkable recovery that should have spawned home improvement projects about nine months later, consumer confidence remains low, damaging growth for home improvement projects. Small investments like DIY tools are doing well, but larger products are still waiting on a home improvement boom.

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