Tumbling to yet another historic low, the most recent Remodeling Market Index (RMI) from the National Association of Home Builders (NAHB) revealed current and near-term anxiety on the part of many remodelers – but hope for a return to long-term growth starting in 2010.
Published quarterly since 2001, the RMI measures remodelers’ perceptions of market demand for their work. Any number above 50 indicates that the majority of remodelers view market conditions as improving.
In the fourth quarter of 2008, the “current market conditions” indicator slid to 27.7, down from the previous low of 33.5 in the third quarter. The “future expectations” indicator also slumped to a historic low of 19.6. Future expectations are defined based on measures that include the amount of committed work for the next three months, calls for bids, backlog of remodeling jobs, and appointments for proposals.
The RMI was consistently above 50 from the third quarter of 2003 through the end of 2005. It peaked in the first quarter of 2004, hitting 56.9 for current conditions and 57.8 for future expectations.
Silence Isn’t Golden
How quiet was the fourth quarter for many remodelers? So quiet that “many remodelers were asking if their phones were still working because they received virtually no calls for work,” said NAHB Remodelers Chairman Greg Miedema of Dakota Builders, Tucson, in an NAHB press release about the RMI.
Open-ended comments accompanying the survey bore this out. “Please call our phone number so we know it still rings and is not broken!,” wrote a Midwestern respondent.
Regional variations suggest that remodelers remain busier in some parts of the country than others. The current market conditions indicator was highest in the South (30.7), lowest in the Northeast (24.9); the Midwest (28) and West (25) fell in the middle. Future expectations range from 23.9 in the South to a darkly pessimistic 12.2 in the West.
In the same press release, NAHB Chief Economist, David Crowe, said stock market volatility and other sources of economic anxiety had caused “consumers to wait and see if conditions improve before they are willing to commit to home improvement spending.”
Overall, 2008 was the second consecutive year for residential remodeling expenditures to drop since 1995, according to the U.S. Census Bureau. Those expenditures were $216.3 million in 2008, down from a peak of $228 billion in 2006.
Census projects that residential remodeling will pick up again next year and will climb steadily to more than $322.3 billion in 2016.
For more on the RMI and a detailed look at fourth-quarter findings, click here.