A gradual slowing in remodeling activity is expected toward the end of 2023.

Two forecasts on the home remodeling market suggest annual spending will top off by the end of 2023 and start to contract in 2024. The Joint Center for Housing Studies at Harvard University’s Leading Indicator of Remodeling Activity said after more than a decade of continuous growth, annual spending on improvements and repairs to owner-occupied homes is expected to decline by early next year. The LIRA projects that year-over-year expenditures for homeowner improvements and maintenance will post a modest decline of 2.8 percent through the first quarter of 2024. “Higher interest rates and sharp downturns in homebuilding and existing home sales are driving our projections for sluggish remodeling activity next year,” said Carlos Martín, Project Director of the Remodeling Futures Program with the Center. “ “Homeowner improvement and maintenance spending is expected to top out at $458 billion in the coming year, compared with market spending of $471 billion over the past four quarters,” said Abbe Will, Associate Project Director of the Remodeling Futures Program. “However, strong and steady growth in the number of homes permitted for remodeling projects, as well as a slew of federal incentives for energy-efficiency retrofits may yet buoy remodeling expenditure from steeper declines.” Separately, the National Association of Home Builders//Westlake Royal Remodeling Market Index came in at 70 in the first quarter, edging up one point compared to the fourth quarter. However, NAHB also expects a gradual slowing in remodeling activity toward the end of 2023. “Remodelers are generally optimistic about the home improvement market, although some are noting negative effects of material shortages and higher interest rates,” said NAHB Remodelers Chair Alan Archuleta, a remodeler from Morristown, N.J. “Customers are still undertaking larger projects, but are mostly paying cash rather than financing them.”

Source: The Mortgage Bankers Association