Home-improvement spending takes a dip

The bad news keeps on coming for the nation’s beleaguered housing industry—just check out the latest housing figures from the National Association of Home Builders and the National Association of Realtors.

With fewer homes being sold and loans harder to come by, the remodeling sector in the United States is now taking it on the chin.

Home-improvement spending in 2007 is projected to decline for the first time since 2003, according to the Leading Indicator for Remodeling Activity (LIRA), published by Harvard’s Joint Center for Housing Studies (JCHS). In the third quarter of 2007, Americans spent $2 billion dollars less than the previous quarter, and U.S. homeowners are expected to spend about 2.3 percent less this year than last on remodeling, says the JCHS. By comparison, from 2004 to 2006, quarterly spending shot up by as much as $10 billion. (Click on the chart above.)

The LIRA is based on nine separate data sets, including retail sales and shipments of building materials. But the two driving forces behind the latest downward trend are the struggling housing market and the credit crunch. Home sellers and home buyers do much of the country’s remodeling, either to get a property ready to sell or to spruce it up after they move in. The other big spenders are homeowners who refinance their mortgage or take out a home-equity loan to make improvements.

“These numbers aren’t terribly surprising,” says Abbe Will, the JCHS researcher who crunched the data. “It will be interesting to see what happens over the next few quarters,” says Will. “But we don’t expect a turn around to happen any time soon.”—Daniel DiClerico

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