A housing study from Harvard University is predicting double-digit gains in home improvement spending in the first half of 2014. Owners gaining confidence in the housing market are likely to take on remodeling projects they have been putting off, encouraged by growth in housing starts, home prices and existing home sales.

The home remodeling market should see strong growth in 2014, according to the Leading Indicator of Remodeling Activity (LIRA) index released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University on January 16. The double-digit gains in annual home improvement spending projected for the first half of the year, however, should regress to less than 10 percent by the third quarter.

"The ongoing growth that we've seen in home prices, housing starts, and existing home sales is also being reflected in home improvement activity," said Eric Belsky, managing director of the Joint Center. "As owners gain more confidence in the housing market, they are likely to undertake home improvements that they have deferred."

LIRA is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. The indicator provides a short-term outlook of homeowner remodeling activity and is intended to help identify future turning points in the business cycle of the home improvement industry.

Credit: Joint Center for Housing Studies of Harvard University

"The strong growth for this cycle may start to ebb a bit beginning around midyear," says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. "By that time, we'll be approaching the pre-recessionary levels of spending, and with borrowing costs starting to creep back up, growth rates are likely to slow some."

The LIRA is released in the third week after each quarter's closing. The next release date is April 17, 2014.