Remodeling and replacement activity nationwide grew 3.3% in the third quarter, reported Metrostudy, a Hanley Wood company, in today's Residential Remodeling Index (RRI) release.

The index follows a 4.3% year-over-year increase in the second quarter, and a 6.5% increase in the first quarter of 2014.

This quarter’s index of 96 is a 0.8% improvement revised second quarter result of 95.3. To date, this is the 11th consecutive quarterly improvement since the market bottomed out in 2011.

The RRI is calibrated against data from 2007, so today's numbers indicate remodelers are doing 96% as much business as they were seven years ago. According to the most recent forecasts, the index should reach 100—a full recovery—by the third quarter of 2015.

"The remodeling market thus far in 2014 is mimicking the muddling along of the overall housing market. The 2014 housing market [saw] its share of first-time buyers hit a 27-year low, while the share of renter occupied housing reached its highest level on record in second quarter," said Brad Hunter, Metrostudy's chief economist.  

"Yet, remodeling activity is being buoyed by growing families and baby boomers, the demographics with deeper pockets, and contractor sentiment is high for these groups." added Hunter.

According to the most recent report, 359 out of 381 Metropolitan Statistical Areas should see year-over-year growth in remodeling and replacement projects in 2014, with average growth of 4%.

"Despite the moderation seen in current 2014 growth, our forecast for the remodeling market to reach full recovery in third quarter 2015 has not changed, mainly due to continually positive job and economic reports that point to a firming in housing fundamentals over the near term. Wage growth, which remains stagnant, will be key to watch heading into next year," said Hunter.

About the Residential Remodeling Index

The RRI is a quarterly measure of the level of remodeling activity in 381 metropolitan statistical areas (MSA) in the U.S., with the national composite reflecting the national level of activity. “Activity” includes home improvement and replacement projects, but does not include maintenance or projects of less than $1,000. The seasonally adjusted index shows the relative level of activity in the geography specified (MSA or national composite) compared to 2007 (the baseline year). A number above 100 indicates a level of remodeling activity higher than the level of activity at the beginning of 2007, which was the peak of remodeling activity in the prior decade.

The index is produced through a statistical model that leverages detailed data on remodeling activity, including household level remodeling permits, and consumer-reported remodeling and replacement projects. Quarterly historical results for the national composite and for each of the 381 Metropolitan Statistical Areas in the U.S. are available back to 2004. In addition, Metrostudy also produces annual estimates of project counts and expenditures as well as forecasts of the quarterly RRI and annual projects and expenditures.