Remodeling and replacement project activity nationwide will strengthen this year from a 2012 that saw business rise in all four quarters, Hanley Wood's latest Residential Remodeling Index (RRI) indicates. The RRI, released today, is forecast by the end of this year to rise 2.8% over the index's score of 84.08 as of the fourth quarter of 2012. That in turn is 0.3% better than the third quarter of 2012 and 2.4% above where the RRI stood in the final three months of 2011.
"We should pick up steam each quarter for the next several quarters as home prices rise, home sales recover, consumer confidence improves, and the volume of investor activity in the resale market begins to peak and abate," said Jonathan Smoke, chief economist of Hanley Wood. Through 2012's fourth quarter, the RRI now has risen for four consecutive periods after having declined in each of the five previous quarters.
Last year, Americans commissioned roughly 10.2 million major remodeling and replacement projects — the kind of jobs that a professional contractor gets called upon to do, Hanley Wood estimates. That's 1% more than 2011 but still below the market's latest peak of 12.2 million in 2007. That year also provides the baseline for the RRI, so the latest number — 84.08 — means that conditions are 84.08% what they were then.
Hanley Wood began producing the RRI over three years ago in order to measure local market remodeling activity, forecast future activity, and identify potential demand for remodelers and building product manufacturers. According to the company’s fourth-quarter report, there are 301 out of 366 Metropolitan Statistical Areas with forecasted growth in project activity for 2013 with the average growth in activity in these recovering markets of 3%.
Hanley Wood ranks the best markets for remodeling based on market health, level of activity, extent of recovery, and potential demand. The current top 10 best markets for remodeling are Buffalo, N.Y.; Houston; Dallas; San Antonio; Pittsburgh; Austin, Texas; Rochester, N.Y.; Oklahoma City; Charlotte, N.C.; and Denver. The largest remodeling markets based on forecasted projects in 2013 are New York, Los Angeles, Chicago, Washington, Philadelphia, Dallas, Houston, Boston, Atlanta, and Miami.
About the Residential Remodeling Index: The RRI is a quarterly measure of the level of remodeling activity in 366 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 $500. 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 366 Metropolitan Statistical Areas in the U.S. are available back to 2004.
More REMODELING articles about markets and industry forecasts:
Diving for Data — Remodeling forecasts offer useful data, but remember: the best remodeling forecast comes from your past work