A steep uptick in remodeling interest among homeowners vs. a general sense of gloom among remodelers: Those seemingly contradictory sentiments summarize two major remodeling industry reports published this week.

Our interpretation: many remodelers’ spirits remain down after a rough 2009, but there’s reason to be hopeful that business will pick up considerably in 2010.

The first report, released Wednesday by ServiceMagic.com, is the Home Remodeling & Repair Index. It finds that in the fourth quarter of 2009, homeowner requests for “additions and remodeling” increased by more than 37% over the same period of 2008. Requests grew 113% for windows, 72% for air conditioning, and 58% for cabinets. Based on these and other data, ServiceMagic projects remodeling activity to increase 35% this quarter and to peak in May (see chart, below).

The second report is the Remodeling Market Index, released Thursday by the National Association of Home Builders. According to the RMI, remodelers in the fourth quarter of 2009 saw declines in bid requests, proposal appointments, job backlogs, and committed work for the next three months. A third survey, released in January, is more in line with ServiceMagic’s findings in revealing an uptick among homeowners who plan to remodel within the next 12 months. Read a summary here.

Foreclosure Frenzy

The ServiceMagic report is based on the 1.2 million service requests the online lead-generating company received from homeowners nationwide last quarter.

Its remodeling  uptick is most dramatic in four of the states hit hardest by foreclosures in 2009, perhaps reflecting the poor condition many foreclosed homes are in and research by current and prospective homebuyers toward the likely costs of improving them.

In Miami, for instance, requests for home additions and remodels increased 110% over the fourth quarter of 2009. Requests for “core” kitchen projects in Phoenix rose 166%, 120% in Chicago, and 112% in San Jose, Calif. (See map, below.)

ServiceMagic CEO Craig Smith, in a letter in the report, attributes this “astonishing growth” and upbeat forecast to pent-up recessionary demand, greater contractor availability, “plus a better macro-economic picture.”

In a separate email exchange with this reporter, he says that the company does not anticipate a return to “pre-recession levels” of remodeling spending, but “our data indicates a positive trend in both homeowner sentiment and activity compared to the last four quarters” as “homeowners show increasing optimism in the stability of their home equity.”

The NAHB report, the quarterly Remodeling Market Index, measures remodelers’ perceptions of market demand for their work. Any number above 50 indicates that the majority of remodelers view market conditions as improving. The RMI suggests the opposite. The “current market conditions” index fell to 36.4 in the fourth quarter of 2009, down from 39.8 in the third quarter. And the index of future indicators dropped from 38.7 to 31.4.

“Although earlier quarters of 2009 showed tentative improvements for remodeling market conditions, remodelers have seen work fall backward at the end of the year,” says NAHB Chief Economist David Crowe in an NAHB press release.

From Concept to Contract

How to explain the disparate findings? Timing is one answer. “There’s no question that market conditions have been tough for remodelers,” Smith explains via email. However, “we identify demand trends at the top of the purchase funnel. So although the actual materials haven’t been purchased or the hammers haven’t started swinging, our data would suggest that there’s a lot of early stage demand that has begun to re-enter the market. Once these projects move from concept to contract and the work begins, we believe that the NAHB data will support these trends.”

A second story, conducted in January by ServiceMagic, supports this. “With regards to remodeling specifically, we surveyed 2,103 homeowners who submitted remodeling service requests from June through December,” Smith says. “A vast majority – 71% -- of these homeowners have not started but intend to complete their project in 2010.”

He adds, however, that “there’s always risk that the market rebound stalls and projects currently being contemplated aren’t completed.” Moreover, as many remodelers would likely attest, it's not uncommon for inquiries to companies like ServiceMagic to be mostly informational and to rarely result in actual work being done.

To that end, there remain selling challenges for remodelers. That same January survey by ServiceMagic found significant discrepancies between homeowners’ expectations about remodeling costs (lower) and actual costs (much higher).

But that’s not exactly news, is it?


Service Magic Home Remodeling & Repair Index

NAHB Remodeling Market Index Report

Previous RMI coverage on Remodeling Online