Developing a Leading Indicator for the Remodeling Industry

This paper describes the process for developing the Leading Indicator of Remodeling Activity (LIRA), designed to estimate quarterly current and future home improvement expenditures by homeowners. The indicator, measured as an annual rate-of-change of its components, provides a short-term outlook of remodeling activity, with a horizon of three quarters. Like all leading indicators, it is intended to also signal turning points in the business cycle of the home improvement industry.