According to the National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI), which measures market demand for current and future residential remodeling projects, current market conditions dropped from 44.5 in the first quarter to 42.6 in the second quarter. The overall index, which includes both current and future market indicators, dropped from 43.8 in the first quarter to 40.7 in the second quarter. Future indicators of remodeling business also declined — down to 38.9 from 43.1 in the previous quarter.
According to NAHB chief economist David Crowe, this drop is part of the overall chill in the housing market and U.S. economy and soft unemployment reports. “It’s a recurrence of the reluctance that has been the cause of a slow recovery,” Crowe says. “This is a second jolt of that reluctance.” But he notes that there are signs that the drop is just a pause and not an actual downturn in the overall market or the remodeling market.
Sluggish Growth vs. Downturn
Kermit Baker, project director at Harvard University’s Joint Center for Housing Studies and chief economist for the American Institute of Architects says it’s hard to know why the RMI indicates a slowdown in the second quarter. “The housing sector attributed it to the expiration of the first-time home buyer tax credit,” Baker says, “but it’s extended beyond housing.”
He notes that Greece’s credit issues began in Q2 2010 and the Dow Jones Industrial Average also decreased during that time. “It’s a little early to tell if this is the beginning of a downturn,” Baker says, “or the beginning of a period of sluggish growth and we’ll see better numbers in the quarters ahead of us.” Second-quarter U.S. GDP shows a slowdown, and “trade and manufacturing are starting to soften a bit. It’s hard to know if that is permanent or temporary.”
—Nina Patel, senior editor, REMODELING.