Strong growth in home improvement and maintenance expenditures is expected to continue over the coming year, according to our latest Leading Indicator of Remodeling Activity (LIRA). The LIRA projects year-over-year gains in annual improvement and repair spending will reach 9 percent in the fourth quarter and maintain that pace into 2022.

Residential remodeling continues to benefit from a strong housing market with elevated home construction and sales activity and immense house price appreciation in markets across the country. The rapid expansion of owners’ equity is likely to fuel demand for more and larger remodeling projects into next year.

With these tailwinds, annual improvement and repair expenditures by homeowners could reach $400 billion by the third quarter of 2022. Yet there are several headwinds that could still taper the expected growth in remodeling spending including the rising costs of labor and building materials, as well as increasing interest rates.

A year after the unprecedented changes to the US economy brought on by the pandemic, many economic indicators are showing extreme percent changes from pandemic-induced lows. To reduce the enormous growth rate volatility generated by these year-over-year comparisons, the projections for 2022-Q2 and -Q3 utilize smoothed data for three leading model inputs: residential remodeling permits, single-family housing starts, and existing single-family home sales. Using unsmoothed inputs in the LIRA model would have projected unlikely annual growth rates roughly two-thirds larger than reported. The Remodeling Futures Program will continue to monitor input volatility.

For more information, visit the LIRA page of our website.