Home Remodeling Growth Expected to Lose Momentum in 2026

After several years of steady gains, U.S. home remodeling activity is on track to slow considerably next year. According to the latest Leading Indicator of Remodeling Activity (LIRA) from Harvard University’s Joint Center for Housing Studies, annual spending on renovations and repairs for owner-occupied homes is projected to grow by only 1.2% by Q2 2026 a significant cooling from the robust pace seen in recent years.

What’s Behind the Slowdown?

Rachel Bogardus Drew, Director of the Remodeling Futures Program, points to weakness in the broader housing market as a major factor weighing on future remodeling activity.

• Fewer construction starts mean fewer opportunities for large-scale renovations.
• Declines in remodeling permit applications a reliable leading indicator suggest that homeowners are delaying or downsizing projects.
• Economic uncertainty and elevated borrowing costs are likely prompting households to postpone non-essential upgrades.

“When the housing market slows, it tends to have a ripple effect on the home improvement industry,” Drew explained. “We’re seeing clear signs of that ripple now.”

What Is LIRA and Why It Matters

The LIRA is essentially an economic forecast tailored to the home improvement sector. Released quarterly since 2007, it combines housing market data, permitting trends, and economic factors to predict the annual rate of change in remodeling expenditures over the coming year.

The index was re-benchmarked in 2016 using data from the American Housing Survey (AHS) to provide a more accurate picture of the $500+ billion U.S. home improvement market.

Could the Trend Reverse?

Chris Herbert, Managing Director of the Center, notes that while the outlook suggests a slowdown, there are wild cards that could shift the trajectory.

“If the housing market rebounds in the second half of 2025, we could see remodeling activity pick up again,” Herbert said. “Additionally, recent federal cuts to incentives for home energy improvements may actually lead to a short-term rush of renovation projects, as homeowners scramble to take advantage before the benefits disappear.”

The Bigger Picture for Homeowners and Contractors

For homeowners, the slowdown could mean less competition for contractors and potentially better pricing on labor and materials though persistent inflation in some categories may limit savings.

For contractors and remodelers, the message is clear: expect slower growth and increased competition for projects in 2026. Firms that diversify services, target energy-efficiency retrofits, or focus on affordable mid-range projects may be best positioned to weather the softer market. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.