Every metropolitan statistical area in the United States can look forward to increasing remodeling activity this year, with growth averaging 4% and the nation as a whole set to reach an unprecedented level of activity by the third quarter. Those are the economic signals emanating today from the latest edition of the Residential Remodeling Index (RRI), a product of Hanley Wood's Metrostudy unit.
The RRI--a formula based on several economic indicators known to influence remodeling--stood at 97.2 as of 2014's fourth quarter. That means remodeling conditions nationwide then were 97.2% of what they were in early 2007, when the remodeling market last peaked. The latest RRI is 3.1% better than the index stood a year earlier. It also is 1.1% better than the revised third-quarter RRI of 96.1 and marks the 11th consecutive quarter of year-over-year gains.
"With demand fundamentals also firming across the country at the close of the year, particularly in employment growth, projected growth rates in the RRI for the next few quarters have strengthened. As a result, the previous forecast for the remodeling market to reach full recovery (a reading of 100.0 or more) by third quarter 2015 remains intact," Metrostudy said in a news release.
Metrostudy chief economist Brad Hunter took heart in an improving job market and recent increases in consumer confidence. "Wage growth rebounded in January, and if increases can stay consistent for a while, it would bode well for the younger generation of potential homebuyers to enter the market," Hunter said. "Additionally, current and future remodeling opportunities are ripe among baby-boomers.”
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. “Activity” includes home improvement and replacement projects worth at least $1,000.
Aside from the national report, Metrostudy also produces RRI's for each of the nation's 381 metropolitan statistical areas. Every one of those markets can expect to see year-over-year growth in remodeling and replacement project activity in 2015, "with average growth of 4%," Metrostudy said.