Home remodeling is projected to grow at the fastest pace in more than a decade this year, according to a report out Thursday.
The leading indicator of remodeling activity, produced by the Joint Center on Housing Studies at Harvard University, suggests homeowner spending on improvements and repairs will be close to $340 billion in 2018, 7.5% higher than spending in 2017. That would be the biggest annual increase since the final quarter of 2007, when the Great Recession began, and it could boost not only the industries that service such activity, but also the broader economy.
“Steady gains in the broader economy and in home sales and prices are supporting growing demand for home improvements,” the Joint Center said in a release. But 2018 spending will also be boosted by restoration from the string of natural disasters in 2017.
The index, also known as the LIRA, gauges the level of activity in remodeling by drawing on economic indicators such as single-family housing starts, home price indices, and existing-home sales, among others.
Those indicators measure the housing market trends that are nudging more and more homeowners to renovate. Extraordinarily lean inventory in the market means there’s fewer options for owners who want to trade up — and higher levels of home equity are helping enable them to expand or upgrade instead.
Home-improvement giant Home Depot has mentioned the remodeling boom several times in earnings reports over the past few quarters. In mid-2017, CFO Carol Tomé told analysts the retailer saw an additional tailwind on the horizon: the biggest number of first-time homebuyers since 2005.
“First-time homebuyers tend to buy homes that need repair and remodel,” Tomé noted. “So as we see and we anticipated this happening, with millennials coming into of age where they start to form families, children, or pets, or whatever their family unit might look like, they’re moving into homes which bodes very well for us, and to your point, it extends the recovery.”