According to Hanley Wood’s Residential Remodeling Index (RRI) and forecast, remodeling activity is reaching the bottom of a minor second dip in the third quarter of 2011. The national composite of the index had shown improvement in the first half of 2010 as housing and the economy appeared to be performing better under the temporary and illusory home buyer tax credits and other stimulus programs. However, the last four quarters reversed the 2010 improvements and set new lows for remodeling activity nationally.

Currently at 79.2, the RRI is forecast to end the year at 79.5, up 0.1% from Q2 2011. This is roughly the same level of activity we’ve seen so far this year. As we start 2012, however, the forecast calls for growth of 1% to 2% quarter-over-quarter (seasonally adjusted).

Of the 366 metropolitan statistical areas in the country, 20 markets should start to see pent-up demand for home improvement driving more activity and are expected to see growth of 9% or more between now and the second quarter of 2012. These high-growth areas include several major markets, such as Cleveland (12%), Pittsburgh (11%), Atlanta (10%), Boise, Idaho (9%), and Oklahoma City (9%).

Figure This

4% - Predicted decline in remodeling spending into the first quarter of 2012, according to the Leading Indicator of Remodeling Activity (LIRA). This downward trend is due to the data used to calculate LIRA being largely dependent on housing market conditions, which have not rebounded as expected. Read more here.