Leading Indicator Points to 6.7% Growth in 2017

(Photo from Joint Center of Housing Studies)

One of the indicators I like to watch is the Leading Indicator of Remodeling Activity (LIRA), put out by the Harvard Joint Center for Housing Studies.  The latest update is out now, and it incorporates new data from the Census Bureau (the American Housing Survey).  The new Census data shows that spending on home improvement and repair went up 11.3% over the two-year span 2014-2015, which was slightly below the previously-estimated growth rate.  Said another way, the growth rate averaged roughly 5.6% per year in 2014 and 2015.  Going forward, the LIRA suggests that home improvement and repair expenditures will rise 6.7% in 2017, after an estimated 6.9% increase for 2016 (and following growth averaging less than 6% per year in 2014 and 2015).

Here’s the take-away. The growth rate in home improvement spending has been outpacing the growth in overall consumer spending by a margin of nearly two-to-one*, and the trend will likely continue this year.  The rise in home values has boosted people’s perception of their own financial well-being, and has also increased their ability to take out home-equity-based loans if they need them for home improvement projects.

*(Nominal Personal Consumption Expenditure growth has been running 3.5% to 3.8% for the last two years).

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