Remodeling expenditures seemed to be peaking through the first nine months of 2011. In the third quarter alone, they hit an annualized estimate of $116.8 billion, the highest this activity has been since the first quarter of 2009.

But remodeling spending is expected to dip precipitously over the next six months, according to the latest Leading Indicator of Remodeling Activity published by the Joint Center for Housing Studies at Harvard University. The Joint Center predicts some recovery by the second quarter of next year, but even the forecasted dollar amount for that period—$110.1 billion, annualized—would be 3.5% less than what Americans spent during the 12-month period ended in the second quarter of 2011.

Bil. $ % Chg.
2Q 2007 $146.2 3.1%
2Q 2008 $125.7 -14.0%
2Q 2009 $115.7 -8.0%
2Q 2010 $114.5 -1.0%
2Q 2011 $114.2 -0.3%
2Q 2012 $110.1* -3.6%*
Source: Joint Center for Housing Studies, Harvard University.

“Homeowners are continuing to undertake smaller jobs but are still nervous about discretionary projects,” says Kermit Baker, the Joint Center’s director of the Remodeling Futures program.

What’s expected to keep remodeling spending down is the lack of push from existing home purchases, which are also in limbo based on September sales, which were 11.3% higher on an annualized basis than a year ago but down 3% from the previous month. “When [existing home sales] break out, [it] will break out upward, but it hasn‘t broken out yet," said Lawrence Yun, chief economist of the National Association of Realtors, which released its latest sales data last week.

This downward trend in remodeling activity is bound to have repercussions for the myriad home-improvement and pro dealers that have shifted their emphasis away from builders and toward repair and remodeling contractors. Many builders around the country have also diversified into remodeling, some as a stopgap until home-buyer demand returns, others as a permanent addition in their business model. The viability of that strategy, though, hinges on the availability of higher-margin remodeling work. And right now, it appears such work could be scarcer in the coming months.

John Caulfield is senior editor for Builder magazine.

Learn more about markets featured in this article: Boston, MA.