Home improvement spending is projected to see double-digit growth through the first half of the year before moderating toward the third quarter. That was the key finding from the Leading Indicator of Remodeling Activity (LIRA), released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. Understanding these home improvement spending trends helps builders, remodelers, and suppliers plan their operations, allocate resources, and position themselves for the periods of strongest demand.
The LIRA data signals that the home improvement market is entering a phase of robust activity. Gains in annual homeowner improvement spending are projected to stay strong through midyear, driven by rising home prices, improving housing starts, and a recovering existing home sales market. However, the data also points to a moderation later in the year as spending approaches pre-recession levels and borrowing costs begin to creep upward. This article examines what the LIRA forecast means for builders and how to prepare for the shifting remodeling landscape.
Understanding the Leading Indicator of Remodeling Activity and What It Measures
The Leading Indicator of Remodeling Activity is not a simple survey of contractor sentiment. It is a data-driven economic model designed to estimate national homeowner spending on improvements for the current quarter and the subsequent three quarters. The indicator measures an annual rate of change across its component data sets, which include housing market metrics such as home prices, existing home sales, housing starts, and permit activity.
How the LIRA Forecast Works
The LIRA produces a short-term outlook of homeowner remodeling activity and is specifically designed to help identify future turning points in the business cycle of the home improvement industry. When home prices rise and sales volumes increase, homeowners gain confidence and are more likely to invest in discretionary improvements and deferred maintenance projects. The model captures these relationships and translates them into spending projections.
Key inputs that feed into the LIRA model include:
- Home price appreciation – Rising equity gives homeowners both confidence and financing capacity for improvements
- Existing home sales volume – Transactions often trigger pre-sale upgrades and post-purchase renovations
- Housing starts and permit activity – New construction signals broader market health that correlates with remodeling
- Mortgage interest rate trends – Borrowing costs directly affect the affordability of major renovation projects
- Homeowner improvement expenditure baselines – Historical spending patterns establish the reference for projected changes
The Joint Center for Housing Studies developed the LIRA methodology in a research note titled “Developing a Leading Indicator for the Remodeling Industry” and has refined it over time. The indicator is released in the third week after each quarter closes, providing timely intelligence for industry professionals tracking housing market indicators that matter most to their business decisions.
What the Double-Digit Growth Forecast Means for Builders and Remodelers
The projected double-digit gains in annual home improvement spending through midyear represent a significant opportunity for builders and remodelers. When the LIRA shows strong growth, it signals that homeowners are willing to spend on both essential repairs and discretionary upgrades. This is the moment to scale up marketing efforts, secure material supply chains, and ensure crews are ready for increased workload.
The Confidence Factor Driving Remodeling Demand
Rising home prices are the primary driver behind the remodeling surge. As homeowners see their property values increase, they feel wealthier and more secure making investments in their homes. This pattern is consistent across market cycles: when home prices are rising, remodeling activity follows. The Joint Center research confirms that the ongoing growth in home prices, housing starts, and existing home sales is being reflected directly in home improvement activity.
Homeowners who deferred maintenance and upgrades during the recession years are now ready to move forward. This backlog of deferred projects includes everything from roof replacements and window upgrades to kitchen remodels and bathroom renovations. The combination of accumulated need and newfound home equity creates a powerful demand driver for the remodeling industry.
Projected Spending Trajectory by Quarter
The LIRA data shows a clear pattern of strong growth followed by gradual moderation. The table below summarizes the projected trajectory of annual homeowner improvement spending growth through the forecast period.
| Forecast Period | Projected Annual Growth Rate | Key Market Conditions |
|---|---|---|
| Current Quarter | Double-digit growth (10%+) | Rising home prices, strong existing home sales, recovering starts |
| Next Quarter | Double-digit growth (10%+) | Peak remodeling confidence, deferred project backlog being addressed |
| Following Quarter | Approaching 10% growth | Spending nearing pre-recession levels, borrowing costs rising |
| Third Quarter | Just under 10% growth | Moderation phase, interest rate sensitivity increasing |
This trajectory highlights the importance of acting on the current window of opportunity. Builders who position themselves early in the growth cycle are better able to capture market share before the inevitable moderation sets in. Understanding these housing market data patterns allows firms to time their investments in staffing, inventory, and marketing.
Strategic Responses for Builders Navigating the Remodeling Growth Cycle
Strong remodeling demand does not automatically translate into profitable business for every contractor. Builders and remodelers need deliberate strategies to capture value during growth periods while preparing for the eventual market normalization. Here are the key approaches to consider.
Capacity Planning and Workforce Development
The most immediate challenge during a demand surge is having enough skilled labor to complete projects. Builders should evaluate their current crew capacity against the projected workload and make hiring decisions early. Waiting until projects are already booked creates scheduling pressure and quality risks.
- Audit current crew utilization rates and identify gaps before peak season arrives
- Develop relationships with subcontractor networks that can scale up quickly
- Cross-train existing employees to handle multiple trade skills for flexibility
- Consider partnering with trade schools and apprenticeship programs for talent pipeline
- Build a bench of reliable suppliers who can guarantee material availability during high-demand periods
Pricing Strategy and Margin Protection
Rising demand may tempt builders to increase prices aggressively, but careful pricing strategy is essential. Material costs often rise during growth cycles, and labor becomes more expensive as competition for skilled workers intensifies. Builders who lock in material prices with suppliers early and maintain disciplined estimating practices protect their margins better than those who chase volume at any price.
Marketing and Lead Generation During Strong Markets
When the remodeling market is growing, many homeowners are actively seeking contractors. This creates an opportunity to focus marketing spend on the most profitable project types rather than broad awareness campaigns. Builders should target homeowners with the highest propensity to spend, including those who have recently purchased existing homes and owners of properties in the 15- to 30-year age range where major systems are due for replacement.
Consider whether adding remodeling services to your business could capture additional revenue from existing customers who already trust your construction expertise. Many production builders find that offering remodeling services creates a natural hedge against new-home market cycles.
Preparing for Market Moderation When Growth Rates Slow
The LIRA forecast projects that the strong growth rates will begin to moderate by the third quarter. This is not a decline in absolute spending levels it is a slowdown in the rate of growth. Spending will still be healthy but the pace of increase will ease. Smart builders plan for both the ramp-up and the normalization.
Why Growth Rates Moderate
Several factors converge to slow the growth rate. As spending approaches pre-recessionary levels of home improvement expenditure, the easy gains from catching up on deferred maintenance are largely realized. Borrowing costs tend to creep upward as the broader economy strengthens, which makes financing large renovation projects more expensive. Homeowners who completed their priority projects early in the cycle are less inclined to start new ones immediately.
This moderation pattern is typical of the remodeling business cycle. It does not signal a market collapse or a return to recession-era conditions. Instead, it signals a return to normal, sustainable growth levels that can support profitable businesses for years. According to the Joint Center for Housing Studies research cited by Harvard research on housing economics, the fundamental demographic drivers of remodeling demand remain intact.
Key Moves to Make Before Growth Slows
- Build a healthy project pipeline that extends into the moderation period before demand peaks
- Strengthen customer relationships through exceptional service during the busy period to secure repeat business and referrals
- Invest in operational efficiency systems that will protect margins when volume growth slows
- Diversify project types to include both discretionary upgrades and essential repairs that continue regardless of economic conditions
- Maintain disciplined financial management, including cash reserves, to weather any unexpected shifts in demand
The Role of Economic Indicators in Business Planning
The LIRA is one of several tools builders can use to anticipate market direction. When combined with other data sources such as the NAHB Improving Markets Index, housing starts reports, and existing home sales numbers, it provides a comprehensive picture of where the remodeling market is heading. Builders who regularly monitor these indicators make more informed decisions about staffing, inventory, capital investment, and marketing spend.
The Remodeling Futures Program at the Joint Center for Housing Studies continues to refine the LIRA methodology to improve its predictive accuracy. For builders and remodelers, this means access to increasingly reliable intelligence about the direction of the home improvement market. Those who use this data to guide their business planning gain a competitive advantage over firms that rely on instinct alone.
Conclusion
The double-digit growth in remodeling spending projected through midyear represents a significant opportunity for builders and remodelers. Rising home prices, improving housing starts, and recovering existing home sales are driving homeowner confidence and unlocking deferred improvement projects. The LIRA forecast confirms that the market is entering a period of strong activity.
However, the data also signals that growth rates will moderate later in the year as spending approaches pre-recession levels and borrowing costs rise. Builders who prepare now by scaling their workforce, securing material supply chains, and building a robust project pipeline will be best positioned to capture value during the growth period and maintain momentum when the market normalizes. The key is to use the current window of strong demand to build a business that can thrive across the full remodeling cycle.