Economic forces, political unrest, labor shortages, supply-chain woes, and so many other factors are having an impact on the construction industry. What do projects look like for the years to come? This week, let’s dig into one specific market: home remodeling.
The homebuilding market overall has seen strong growth in the past several years, even amid a pandemic and other disrupting factors, but now it appears growth may begin to stall. The Joint Center for Housing Studies of Harvard University releases its LIRA (Leading Indicator of Remodeling Activity) quarterly and uncovers declines in the year ahead.
In fact, the Joint Center for Housing Studies of Harvard University suggests year-over-year expenditures for homeowner improvements and maintenance will post a modest decline of 2.8% through the first quarter of 2024.
Looking a bit more at the research, the organization suggests that higher interest rates and sharp downturns in homebuilding and existing home sales are some of the primary reasons for the slow remodeling activity that is projected for the next year.
Other factors include ongoing uncertainty in financial markets and the threat of a looming recession. With all this in mind, homeowners are likely to slow or delay projects, repairs, and replacements beyond what is absolutely necessary in their homes.
Looking deeper at the numbers, homeowner improvement and maintenance spending is expected to top out at $458 billion in the next year. This is compared to the $471 billion in the past four quarters. That is quite the drop.
Still, there is some hope. The data suggests strong and steady growth in the number of homes permitted for remodeling, as well as a slew of federal incentives for energy-efficiency retrofits that may buoy remodeling expenditures from an even steeper decline.
All in all, the data shows that after a long stretch of continuous growth, annual spending on improvements and repairs to owner-occupied homes is expected to decline by early next year, according to this indicator.
The homebuilding market has been strong and thriving for years, but the data shows the construction industry may be on the cusp of a downturn. Now is the time for homebuilders to shore up business processes to be more resilient, leverage technology to the fullest, and prepare for tighter times. How will your construction business respond?
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