2020 Vision: The Future Of Home Remodeling Franchises
If you’ve been running a home remodeling franchise or researching the industry over the last few years, you know that business has been good!
Renovating spending rose to new heights in June 2019, where Americans spent $322 billion on remodeling and home repairs. This represents a 6.8% jump from 2018, according to Harvard’s Joint Center for Housing Studies.
Remodelers continued to smash historical spending records right into the new year, ending 2019 strong with approximately $331 billion.
But what can we expect for 2020? Today’s post digs into Harvard research to show you just that!
The Future Of Home Remodeling Franchises
If you want a glimpse into the future, the best place to look is the LIRA.
According to Harvard’s Joint Center for Housing Studies website, the LIRA chart, or “Leading Indicator of Remodeling Activity,” “provides a short-term outlook of national home improvement and repair spending to owner-occupied homes. The indicator, measured as an annual rate-of-change of its components, is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters, and is intended to help identify future turning points in the business cycle of the home improvement and repair industry.”
Late last year, the LIRA projected that annual home improvement and maintenance expenditures would post a modest decline of about 0.3% through the third quarter of 2020.
“At $325 billion, owner improvement and repair spending in the coming year is expected to essentially remain flat compared to market spending of $326 billion over the past four quarters,” says Abbe Will, Associate Project Director in the Remodeling Futures Program at the Center.
This has been ballyhooed all over the internet by clickbaity posts trying to scare the living daylights out of investors and remodeling business owners, but is 0.3% really any reason to get your trousers in a twist? Words like “flat spending” and “decline” sound bad, but the reality is that the home remodeling market will still be generating $325 billion in 2020. That’s still more than the record-breaking $322 billion that everyone celebrated last year!
And if you look closely at the LIRA chart discussion, you’ll see even more good news.
“Slowdowns in other key indicators of improvement spending—project permitting, sales of building materials, and home prices—also suggest the remodeling market may be reaching a turning point. However, today’s low mortgage interest rates may help counter some of these headwinds, which could buoy home improvement expenditure over the coming year,” writes Abbe Will.
In other words, 2020’s big “decline” really amounts to a tiny drop-off in growth–more a market stabilization than anything–and one which will soon be reversed by declining mortgage rates.
If you’re seriously considering starting a home remodeling franchise, be sure to stay tuned, because the next LIRA release date is January 16th, 2020!