According to the Joint Center, “Sluggishnessin the housing market and specifically in home sales may result in adeceleration of home improvement spending from double-digit annual growththrough the third quarter to a year-over-year gain in the high single digits bythe end of the year.” The LIRA is a moving average designed toestimate national homeowner spending on improvements for the current quarterand subsequent three quarters. The indicator, measured as an annualrate-of-change of its components, provides a short-term outlook of homeownerremodeling activity and is intended to help identify future turning points inthe business cycle of the home improvement industry. This is the second consecutive quarterthat the duration of the recovery anticipated by the LIRA has beenextended. The model released in October 2013 anticipateda slowdown beginning in the second quarter of 2014. That was extended to the third quarter in theJanuary although the rate of that growth was downgraded from October estimates. The Center now projects that growth in themoving average will continue into the third quarter, increasing 6 basis pointsto 14.5 percent. It will then slow inthe fourth quarter, with spending decreasing from $158.9 billion to $153.1billion, a decrease of 5.8 percentage points. “Home improvement spending has already recovered a significant share of itslosses from the downturn,” says Kermit Baker, director of the RemodelingFutures Program at the Joint Center. “As spending moves into the next phase,we expect to see recent double-digit growth tail off to its longer-term averagein the mid-single-digit range.” The Center also announced that, becauseof the upheaval in financial markets over recent years, it has found thetraditional relationship between interest rates and home improvement spendinghas significantly deteriorated. As aconsequence, starting this quarter long-term rates have been removed from theLIRA estimation model.
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