Home Remodeling Set to Slow in Sluggish Sign for Housing Market

Home improvement isn’t only for people with ’90s nostalgia and a Disney+ subscription. Outside of the Tim Allen sitcom, it’s a vital pulse check that economists use to track the health of the housing market. 

And lately it’s been looking a little under the weather. On Monday, Harvard University’s Joint Center for Housing Studies released its quarterly Leading Indicator of Remodeling Activity (LIRA) report, which measures home renovation and repair spending in the United States. Repairs, experts note, closely track the broader housing market, which is why signs of a slowdown in the second half of the year warrant close reading.

Put a Socket in It

LIRA, a weighted average of economic indicators used to project spending on home remodeling, additions and alterations, accounts only for homes occupied by their owners.

The Harvard center said its latest projection based on LIRA is that home renovation spending will rise 2.9% in early 2026 before shrinking to 1.6%. All told, spending on home improvement and maintenance, expected to total $522 billion in 2026, appears to be losing strength amid cost pressures. Earlier this month, Bankrate forecast that interest rates on home equity loans and home equity lines of credit will ease somewhat this year but still average 7.75% and 7.3%, respectively. Those are significantly higher than the historic low equity loan rates of 3.86% during the pandemic. The cost of materials has gone up, too, and there are even signs that renovating before selling isn’t the advantage it once was:

• According to a Realtor.com report last month, the median flipped home in the US was purchased for roughly half the market median price last year. Even after renovation, it was listed for only 87.8%.
• The report also found that flipped homes sold at an 8.3% discount from their initial listing price following renovation, suggesting softening demand.

Staying Put: Cost pressures are being felt in the broader market: The National Association of Realtors (NAR) said its pending home sales index fell 9.3% in December. Uncertainty about the economy and labor market has incentivized homeowners with mortgage rates below 5% — aka the majority of them — against listing their properties, even as mortgage rates have eased. Realtor.com analysts forecast mortgages will average 6.3% in 2026, meaning jumping back into the housing market would force them to risk paying a higher interest rate.