Remodeling Activity Forecast to Trend Down in 2008 According to Harvard

The housing market is in a slump so its no surprise that the remodeling business is expected to follow. Today, the Harvard Joint Center for Housing Studies released the latest numbers from its Leading Indicator for Remodeling Activity (LIRA). The indicators show that homeowner activity on remodeling will drop in 2007 for the first time since 2003 and continue to decline into 2008.

“As homeowners become increasingly concerned about falling house prices and a slowing economy, home improvement spending is dragging” explains Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “Coupled with very modest home sales, spending levels are likely to fall.”

The Center blamed the drop-off in the credit crunch.

“The recent problems in credit markets are expected to dramatically reduce the level of cash-out mortgage refinancing activity,” comments Kermit Baker, director of the Remodeling Futures Program of the Joint Center. “Given that equity withdrawals have been a key source of funding for home improvements, market spending is expected to suffer.”

One can only wonder how this will impact stocks like Home Depot and Lowes and the general economy.

Home Depot stock has dropped recently but is nowhere near its 5 year lows:

Less spending on remodeling will hit a broad swatch of laborers and companies who have ramped up over the last couple of years to satisfy almost unending demand for new kitches, bathrooms, family rooms, etc.