Projecting Home Improvement Spending at the Metropolitan Area Level

While the Joint Center produces regular projections of home remodeling and repair activity at the national level, new analysis of the American Housing Surveys (AHS) suggests that the timing and depth of residential remodeling market cycles vary considerably by geographic location. This research note discusses the development of a model for projecting home improvement spending growth at the metropolitan area level utilizing benchmark data based on AHS estimates for four metropolitan areas: Chicago, Detroit, Los Angeles, and Philadelphia. The result is a model that performs fairly well, explaining two-thirds of the variation in average annual spending growth rates across these areas between 1995:Q4 and 2015:Q4. While the model performed reasonably well in predicting the sign of growth (positive or negative), at times it over- or under-predicted the magnitude of growth. Model inputs, obtained from Moody’s Analytics and BuildFax, include retail sales of building materials and garden supplies, single-family house prices, single-family housing starts, single-family home sales, and remodeling permits. Uses, limitations, and possible future refinements to the model are discussed.

Appendix A is available as a downloadable Excel file here.

Appendix C is available as a downloadable Excel file here.

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