Like that Little Engine That Could, remodeling companies that think they can -- and have traveled this far -- just might make it over that hill yet. The results of the second quarter 2009 Remodeling Market Index (RMI) from the National Association of Home Builders (NAHB) revealed cautious optimism that the worst is behind and better times lie ahead.
Published quarterly since 2001, the RMI measures remodelers’ perceptions of market demand for their work. Any number above 50 indicates that the majority of remodelers view market conditions as improving.
In the second quarter of the year, the RMI’s “current market conditions” indicator grew to 38.1, up from 34.5 in the first quarter, which in itself was a dramatic uptick from the low of 27.7 in the fourth quarter of 2008. The “future expectations” indicator rose to 34.2, up from 30 in the previous quarter and way up from the historic low of 19.6. Future expectations are defined based on measures that include the amount of committed work for the next three months, calls for bids, backlog of remodeling jobs, and appointments for proposals.
Indicators for current remodeling market conditions improved across all regions, with demand rising fastest in the West and South.
- West (40.5, from 32.8)
- South (39.7, from 34.3)
- Northeast (36.9, from 35.7)
- Midwest (38.3, from 36.1)<</li>
Major additions and alterations (jobs worth $25,000 or more) accounted for a significant portion of the overall improvement; 38.2% of remodelers perceive that category to be improving (from 32.7 in the first quarter). Indicators for minor additions and alternations (less than $25,000) rose to 41.5 (from 39.1), and for maintenance and repair to 33.6 (from 30.4)
All measures for future expectations in the remodeling market significantly increased. Remodelers reported growth in calls for bids at 38.8 (from 34.2 in the first quarter). The backlog of remodeling jobs jumped to 34.4 (from 28.5). And appointments for proposals climbed to 40.3 (from 35.3).
“While remodelers remain cautious, they report business is looking a little better after several challenging quarters,” said NAHB Chief Economist David Crowe, in a press release issued by the NAHB. “Conditions for this quarter have returned to nearly the levels of this time last year. The uptick in the expectations component suggests this trend will continue as the entire housing market begins its recovery.”
For historical perspective, the RMI was consistently above 50 from the third quarter of 2003 through the end of 2005. It peaked in the first quarter of 2004, hitting 56.9 for current conditions and 57.8 for future expectations. --Leah Thayer, senior editor, REMODELING.
To see the press release on the latest RMI, click here.
Click here to see REMODELING's previous coverage of the Remodeling Market Index.