Spending on Residential Improvements Edges Down in March

The most recent data from Construction Spending showed that spending on residential improvements fell to a seasonally adjusted annual rate of $173 billion in March 2019, down by 3.1% over February estimate, and was 14.1% lower than a year ago. Residential Improvement Spending has experienced weakness after reaching the peak of $216.7 billion in April 2018. The recent downward trend in improvements spending mirrors the recent softness of NAHB’s Remodelers’ Market Index.

Private residential improvements, as defined by the Census Bureau in its series on Construction Spending, include spending on remodeling, major replacements, and additions to owner-occupied housing units. Maintenance and repair are thus excluded, as is any spending on rental and vacant properties.

Improvement spending held up relatively well in the Great Recession compared to spending on new single family and multifamily construction. It fell around 30 percent from the peak pre-recession level, compared to an 80 percent plunge in new single-family construction spending and a 50 percent decline in new multifamily construction spending. From June 2009 through the first half of 2013, spending on residential improvements continued to recover, but remained relatively flat with an average monthly increase of 0.1%.

Residential improvements spending experienced a robust growth in 2013-2018. It increased to $216.7 billion, hitting the new record high in April 2018, from around $116.0 billion in July 2013. The average annual change of improvements spending during this period was around 13%. The strong growth of residential improvements was largely driven by the aging of household stock and the aging of homeowners. The aging of housing stock, one of the consequence of modestly improving but still relatively low new construction during the past decade, has contributed to the growth of residential improvements. Half of owner-occupied homes were built before 1980, which require some replacements and/or additions of new amenities. The aging of homeowners was another factor, as the share of remodelers undertaking projects to accommodate aging-in-place increased significantly between 2013 and 2017.

While the data is often subject to significant revisions, home improvement spending is experiencing downward pressure from weak existing home sales volume, slowing home price growth and lingering uncertainty in the economy due to the stock market decline at the end of 2018 and the partial government shutdown.



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