Home improvement activity kicked into high gear in the third quarter of the year and is expected to continue to show strong gains well into 2014, according to a leading indicator from Harvard University.
Spending on home remodeling projects jumped at an annual rate of 10.4 percent during the third quarter, to an estimated total of $140 billion, and is expected to continue to rise at double-digit annual rates well into 2014. That's according to third quarter tallies from LIRA, the Leading Indicator of Remodeling Activity from Harvard's Joint Center from Housing Studies.
"In the near term, homeowner spending on improvements is expected to see its strongest growth since the height of the housing boom," said Kermit Baker, director of the Remodeling Futures Program at the Joint Center. "Existing home sales are still growing at a double-digit pace, and rising house prices are helping homeowners rebuild equity lost during the housing crash."
Existing home sales, home equity driving gains
Both of those trends help drive remodeling activity, as purchasers of existing homes often undertake improvements upon taking possession and rising home values make it easier for current homeowners to obtain home equity loans, which are a major source of funding for home improvement projects.
The Center is projecting home improvement spending to show annual increases of 15.9 percent and17.3 percent in the next two quarters, topping out are nearly $150 billion in the first quarter of 2014 before easing off slightly.
Eric Belsky, managing director of the Joint Center, said higher financing costs and a recent slowdown in home building overall is expected to lead to slower increases in home improvement spending around the middle of next year, but that overall remodeling activity should remain at healthy levels.
Home improvement spending had been posting annual gains in the four percent range through the earliest portion of this and late 2012, before turning sharply upward in the third quarter.