The annual growth in the national market for spending on home remodeling in the U.S is expected to slow significantly by mid-2020, thanks to falling home sales and slower gains in remodeling permits, according to a study.

The Leading Indicator of Remodeling Activity or LIRA was released by the Remodeling Futures Program at the Joint Center for Housing Studies or JCHS of Harvard University.

According to LIRA, annual gains in homeowner expenditures for improvements and repairs will shrink from 6.3 percent in the current quarter to a gain of just 0.4 percent by the second quarter of 2020.

"Declining home sales and homebuilding activity coupled with slower gains in permitting for improvement projects will put the brakes on remodeling growth over the coming year. However, if falling mortgage interest rates continue to incentivize home sales, refinancing, and ultimately remodeling activity, the slowdown may soften some," Chris Herbert, Managing Director of JCHS, said.

Home improvements include remodeling, renovation, restoration, additions, alterations and replacements of home components which add value to a home or property, while maintenance and repair activities simply preserve the current value of the home.

Homeowners are estimated to have spent $322 billion on remodeling in the second quarter of 2019, representing a 6.8 percent increase from the prior-year quarter. Remodeling spending is expected to rise to $328 billion in the third quarter of 2019, marking a 6.3 percent increase year-over-year.

However, remodeling spending is projected to be only $323 billion in the second quarter of 2020, representing growth of just 0.4 percent from the second quarter of 2019.

Abbe Will, Associate Project Director in the Remodeling Futures Program, said that the release of new benchmark data from the American Housing Survey led the JCHS to lower its projection for the remodeling market size about 6 percent to $323 billion.

Will noted that spending in 2016 and 2017 was not nearly as robust as expected, growing only 5.4 percent over these two years compared to estimated growth of 11.9 percent.

LIRA provides a short-term outlook of national home improvement and repair spending to owner-occupied homes. The indicator is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters.

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