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Click here for a list of the percent change from last year of all U.S. Metropolitan Statistical Areas.

Two years ago, of the 366 metropolitan markets nationwide, only one — Cincinnati — was forecast by year end to enjoy conditions more favorable to remodeling than that market had shown at housing’s peak in 2007. One year ago, just four markets were forecast to exceed 2007’s showing.

That was then.

This year’s total: 105.

For the first time since housing’s bubble burst, we’re going into a building season in which close to a third of the U.S. metro areas are showing the most favorable economic fundamentals in nearly a decade.

But the forecasts created by Metrostudy for REMODELING also show that the good news doesn’t travel nationwide. The bottom 20 markets are struggling with conditions no more than three-fifths as good as they were in 2007. And Metrostudy says it will take until 2016 before the whole nation tops the old mark.

Add 'Em Up

Technically, the lists of top 100 remodeling markets and the bottom 20 markets shown here don’t predict how much remodeling activity there will be. Rather, they report the number produced by an econometric model — a mathematical formula, basically — that weighs six different economic variables that, over the years, have shown a strong correlation with remodeling activity.

So when they go up, it’s safe to predict that remodelers will get busy. The six variables are household median income, household growth, median existing home prices, unemployment, existing home sales, and the number of housing permits issued.

The forecast is reported as an index in which the number produced by the formula is compared with what it was in early 2007, when remodeling activity was at its busiest this millennium. That 2007 activity number was converted to 100, and the latest forecast number is compared to it. A forecast above 100 means a market will be busier by year-end 2013 than it was in early 2007.

For instance, Bismarck, N.D.’s score of 128.3 basically means conditions for remodeling will be 28.3% better than they were in 2007. Similarly, a score below 100 means a market will be less busy. The bottom-dweller on the list, Salinas, Calif., will have conditions for remodeling that are only 47.5% as promising as they were six years earlier.

The numbers were compiled by Metrostudy, a sister company to REMODELING within Hanley Wood.

No Snow, Lots of Woe

Markets in the Sun Belt — particularly California and Florida — dominate the list of weak areas for remodeling.

When you’re hot, you’re hot, and when you’re not ... you show up at the bottom of Metrostudy’s rankings of remodeling prospects for 366 markets nationwide. Addresses in California, Florida, Nevada, and Arizona can be found in 19 of the bottom 20 rungs; Detroit is the only exception. And again, except for Detroit, virtually all the others were cited nearly a decade ago as examples of housing markets that had gone wild.

In all 20 at the bottom, Metrostudy says the economic conditions that promote remodeling projects are no better than 60% of what they were in the spring of 2007, when the housing market peaked.

For many of these markets, the problem isn’t how they compare with national averages today but rather how far they have fallen from what they were like when the index’s baseline was set. For instance, even today, No. 366 Salinas bests the national averages in three of the six factors used to create the forecast number: median income, household growth, and median home prices. The trouble comes when one compares its current standing with how it was doing in 2007. Those figures show median household income in this northern California market has fallen more than 57%, while the number of permits is down 54% and the unemployment rate has climbed to 11% from 7%.

Along with being the odd man out geographically, Detroit also is unique among the bottom 20 in its prospects. Its score rose by 4 points from its 2012 standing, more than double the average growth nationwide. Salinas, meanwhile, went nowhere.

Clearing Skies Ahead

Two new reports from Harvard’s JCHS buttress Metrostudy’s buoyant market forecasts.

REMODELING’s sister company Metrostudy isn’t the only group to predict better times ahead. The Joint Center for Housing Studies (JCHS) of Harvard University recently delivered a double dose of encouraging news.

The first was JCHS’ latest Leading Indicator of Remodeling Activity. Better known as LIRA, the indicator predicts that major remodeling spending in the four quarters ending Oct. 1 will total $145.5 billion. That’s 19.7% more than was recorded in the preceding four-quarter period.

Notably, this growth forecast is for big remodeling projects, such as kitchen and bath jobs. LIRA doesn’t track the dollars plunked down by homeowners for maintenance projects or by landlords for their rental housing.

JCHS followed LIRA with a special new report, Ready for Renewal, that examines the prospects for improving America’s housing stock. Its major point: While residential fixed investment dropped from 5.2% of gross domestic product (GDP) before the housing crash to 2.8% of GDP between 2008 and 2012, conditions are ripe for spending to rise again.

“Lenders and new owners are rehabilitating millions of foreclosed properties,” JCHS noted. “Older homeowners are retrofitting their homes to accommodate their future needs. Households in general are increasing their investments in environmentally sustainable improvements. And with the huge echo-boom population moving into the home-buying market over the coming decade, the remodeling industry can look to an even more promising future.”

The report also cited the continuing importance of baby boomers to the remodeling business, particularly as that cohort ages and wants a home that can accommodate boomers’ needs as they age. But older folks also are more likely than younger people to rely on outside help for projects, JCHS said. And they spend more for the work that’s done.


—Craig Webb, editor-in-chief, REMODELING.