The Leading Indicator of Remodeling Activity (LIRA) is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. The indicator, measured as an annual rate-of-change of its components, provides a short-term outlook of homeowner remodeling activity and is intended to help identify future turning points in the business cycle of the home improvement industry. The LIRA is released by the Remodeling Futures Program at the Joint Center in the third week after each quarter’s closing.
The development of the LIRA is detailed in:
N07-1: Developing a Leading Indicator for the Remodeling Industry.
In July 2008, the LIRA was re-benchmarked due to changes in the underlying reference series. These changes are explained in:
N08-1: Addendum to Research Note N07-1: Re-Benchmarking the Leading Indicator of Remodeling Activity.
View the latest Press Release for the Historical LIRA Data and Calculation Methodology
Frequently Asked Questions about the LIRA
What does the LIRA measure?
The LIRA uses the Department of Commerce’s Private Construction Spending Put in Place series, also known as the C-30, to project the value of residential improvements in the U.S. According to the Department of Commerce, home improvements include remodeling, additions, and major replacements to owner-occupied properties after the completion of the original building. More specifically, the C-30 improvements survey data includes homeowner spending for:
- construction of additional housing units in existing residential structures,
- finishing of basements and attics,
- modernization of kitchens, bathrooms, etc.,
- improvements outside of residential structures, such as the addition of swimming pools and garages,
- replacement of major systems and equipment items such as water heaters, furnaces and central air-conditioners.
It is important to note that the C-30 does not capture homeowner spending for painting and landscaping, nor routine maintenance and repair work. Furthermore, the Department of Commerce does not collect any data on remodeling or repair activity to rental units.
How is the LIRA computed?
The LIRA was developed to project short-term trends in national home improvement spending by estimating an annual rate of change in spending for the current quarter and subsequent three quarters. This annual or moving four-quarter rate of change compares total spending in any given four-quarter period to the total spending that occurred in the four quarters prior to that period.
View an example of how a moving four-quarter rate of change is calculated.
How do you read the LIRA chart?
The LIRA projections, which are annual rates of change in improvement spending, can be found in the line graph for the last four quarters of the chart. Since the LIRA is designed as a forward-looking indicator, all of the historical data in the chart comes directly from estimates of improvement spending in the Department of Commerce’s C-30 series.
The bars in the LIRA chart each represent four-quarter spending totals, where each bar is the sum of spending in that quarter plus what was spent in the three quarters prior (i.e. the value of the bar for 2010-1 is the accumulated spending that occurred during 2009-Q2, 2009-Q3, 2009-Q4 and 2010-Q1). In this way, the bars for the fourth quarters in the chart represent what was spent during that calendar year. The line chart provides moving four-quarter rates of change in spending levels on a quarterly basis. For example, in 2008-4 the rate of change of -13.6 percent is the decline in total spending in all of 2008 ($120.1 billion) compared to estimated spending in all of 2007 ($139.1 billion).
Which economic indicators are used as inputs in computing the LIRA?
The LIRA makes use of several economic indicators that historically have had strong correlations and leads over remodeling spending to anticipate near-term changes in the market. Currently the LIRA model utilizes the following eight indicators:
- National Association of Home Builders’ Remodeling Market Index-Future Expectations;
- National Association of Realtors’® Pending Home Sales Index;
- Federal Reserve Board’s 30-Year Treasury Bonds Yield;
- U.S. Census Bureau’s Single Family Housing Starts;
- U.S. Census Bureau’s Retail Sales at Building Materials and Supplies Dealers;
- U.S. Census Bureau’s Manufacturers’ Shipments of Construction Materials, Wood Products and Household Appliances;
- Bureau of Labor Statistics’ Number of Employees of Residential Remodelers;
- Institute of Supply Management’s Purchasing Managers’ Index
More detailed information on the inputs can be found in Table 2 in “Addendum to Research Note N07-1: Re-Benchmarking the Leading Indicator of Remodeling Activity” (JCHS Research Note N08-1).
Is the LIRA available at a regional, state, or metro level? What about for specific categories of remodeling projects? Or by professionally-installed vs. DIY projects?
No. Unfortunately, collecting high quality, detailed remodeling data continues to be a struggle for the industry. Quality and timely data at the national level is limited, and data on remodeling spending at the state and local level is not routinely collected. Data on remodeling spending by project type and installation detail is available in the American Housing Survey, released once every two years.
Why do the remodeling spending estimates released quarterly with the LIRA differ from the Joint Center for Housing Studies’ biennial market size estimates?
The LIRA is benchmarked to the Commerce Department’s C-30 series, which only measures home improvement spending to owner-occupied properties, while the Joint Center’s total market size estimates include improvement spending to both owner-occupied and renter-occupied properties, as well as maintenance and repair spending to both owner- and renter-occupied properties.
The data sources for the LIRA and the Joint Center’s total market size estimates are different because they serve different purposes. The LIRA is designed to measure short-term trends in remodeling spending, whereas the market size estimates provide a comprehensive measure of the size of the remodeling industry. These estimates use data from HUD's American Housing Survey (AHS), which is conducted only once every two years. While the AHS provides a more comprehensive measure of homeowner improvement spending levels compared to the monthly C-30 series, a more frequent and timely data series, such as the C-30, is needed to estimate trends in remodeling activity with the LIRA. Although the Joint Center does not consider the C-30 levels to fully capture the market, the trend in spending in the C-30 is generally considered to reflect true activity in the market.
The C-30 data on remodeling spending comes from the Bureau of Labor Statistics’ Consumer Expenditure survey (CE). More detailed information on the differences in remodeling data collected by the CE and the AHS can be found in the following Census Bureau document: “Research into the Differences in Home Remodeling Data: American Housing Survey and Consumer Expenditure Survey/C50 Report.”