The Remodeling Market Index (RMI) climbed five points to 50 in Q3 2012, according to the National Association of Home Builders (NAHB). Released today, the RMI is at its highest point since the third quarter of 2005, tracking the positive trends recently seen in the rest of the housing sector.
The new numbers are in line with what has been occurring in the housing market as new-home prices are on the upswing combined with homeowners finally upgrading their houses, according to Paul Emrath, vice president for Survey and Housing Policy Research, NAHB. “A lot of homeowners have just gotten tired of putting things off and are now undertaking projects to make their homes more attractive and comfortable,” he says. “It’s possible that the stability of house prices is helping by giving them some confidence that improvements they make will be more likely to hold their value.”
The RMI is based on a quarterly survey of NAHB remodelers that asks them to rate current remodeling activity along with indicators of future activity, i.e., calls for bids. An RMI below 50 indicates that more remodelers report market activity is lower (compared with the prior quarter) than those who report higher market activity. “It’s good to be up to 50 and over 50 in current conditions,” Emrath explains, adding that “50 is sort of a break-even point when equal numbers of remodelers report better than worse conditions.”
Pent up Demand for Remodeling
All three indicators of current market conditions improved: maintenance and repairs rose to 56 (from 50); minor additions and alterations to 51 (from 47); and major additions and alterations to 49 (from 42). Current market conditions improved or held steady in all four regions in the third quarter of 2012. Current remodeling activity was particularly strong in owner-occupied housing; the subcomponents of the current conditions index for owner-occupied housing were all well over 50, ranging between 55 and 60.
Future market indicators in every region but the Northeast experienced gains from the previous quarter: Northeast, 38 (from 41); Midwest, 50 (from 46); South, 52 (from 46); and West, 52 (from 42). All indicators of future market conditions rose: calls for bids, 48 (from 44); amount of work committed for next three months, 46 (from 43); backlog of remodeling jobs, 50 (from 46); and appointments for proposals, 51 (from 43).
These numbers echo the Leading Indicator of Remodeling Activity (LIRA) released last week by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University, which showed a significant uptick in remodeling activity with a positive outlook for continued growth well into 2013.
Based on the data from the RMI, Emrath says that remodelers should anticipate some increase in business going forward. “We think that there [are] still projects that have been put off and pent-up demand to release,” he says. But he cautions that there are still some constraints present that could pose problems such as “uncertainty over macroeconomic conditions; it can still be difficult getting financing, especially on larger projects.” —Mark A. Newman, senior editor, REMODELING.
ABOUT THE RMI: The RMI is based on a quarterly survey of professional remodelers whose answers to a series of questions are assigned numerical values to calculate two separate indexes. The first index gauges current market conditions and is based on remodelers' reports of major and minor additions and alterations, plus maintenance work and repairs, on both owner- and renter-occupied dwellings. The second index summarizes indicators of future remodeling activity and is based on remodelers' responses to questions about calls for bids, amount of work committed to for next three months, job backlogs, and appointments for proposals.
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