The fundamentals are in place for this year to be the best one since 2005 for remodeling and replacement activity, with 192 markets nationwide expected by mid-2014 to beat their previous high-water marks, the latest Residential Remodeling Index (RRI) indicates today.
The tool, a compilation of key economic indicators known to spur remodeling work, shows the first half of 2013 was better for remodelers than previously forecast, with the seasonally adjusted national composite rising to 89.1. The RRI for the first quarter was 87.6.
The new index means conditions nationwide are 89.1% as good as they were at the start of 2007, when business peaked. But that national number masks vast differences within America’s 366 metropolitan statistical areas. Metrostudy, the Hanley Wood unit that compiles the RRI, predicts 192 of those markets will have local RRI indexes at or above 100 by mid-2014. Most are in areas where conditions were depressed in early 2007, such as Bismarck, N.D. (RRI: 147.5), and Elmira, N.Y. (RRI: 138.9), so the comeback didn't have to be all that strenuous.
In contrast, markets in California and Florida that had been going full-bore in early 2007 are showing the worst indexes now. Salinas, Calif., sits at the bottom of the RRI list at 52.1. A total of 174 markets are forecast in the second quarter of 2014 to still be shy of their 2007 peaks. And the national RRI won’t top 100 until spring 2016, Metrostudy says.
Metrostudy chief economist Jonathan Smoke focused on the bright side of the numbers, such as the fact that 364 of the 366 markets are forecast to grow in 2013.
“The year started stronger than we previously estimated once we received a full set of remodeling permit data and could also factor in home sale activity,” Smoke said. “And with our first read of activity in the second quarter of this year, we are seeing improvements in the remodeling market that should lead to this year being the best year for growth since 2005.”
Metrostudy predicts that the number of remodeling and repair projects will rise 6.8% this year to total 10.8 million, with the value of that work rising 10% from 2012 levels to $155 billion. By 2016 we should see 8.3% more projects than in 2012, at 13.2 million, with expenditures rising 13.3% from 2012 levels to reach $206 billion.
The RRI is a quarterly measure of the level of remodeling activity in 366 metropolitan statistical areas in the U.S., with the national composite reflecting the national level of activity. “Activity” includes home improvement and replacement projects, but does not include maintenance or projects of less than $500. The seasonally adjusted index shows the relative level of activity in the geography specified (MSA or national composite) compared to 2007 (the baseline year). A number above 100 indicates a level of remodeling activity higher than the level of activity at the beginning of 2007, which was the peak of remodeling activity in the prior decade.
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. Quarterly historical results for the national composite and for each of the 366 Metropolitan Statistical Areas in the U.S. are available back to 2004. In addition, Metrostudy also produces annual estimates of project counts and expenditures as well as forecasts of the quarterly RRI and annual projects and expenditures.--Webb is editor-in-chief of REMODELING. Follow him on Twitter at @craiglwebb and REMODELING at @remodelingmag.
The Top 10 RRI Market Forecasts
(With overall ranking, index forecast for 2Q2014, and number of projects forecast in that market for 2013)
|Market||2013 Forecasted Projects||RRI Forecast 2Q2014|
|1) Bismarck, ND||5,977||147.5|
|2) Charlotte-Gastonia-Rock Hill, NC-SC||102,701||139.0|
|3) Elmira, NY||4,637||138.9|
|4) Midland, TX||6,797||137.4|
|5) Buffalo-Niagara Falls, NY||56,580||135.4|
|6) San Angelo, TX||4,409||134.9|
|7) Yakima, WA||7,624||126.7|
|8) Peoria, IL||18,220||125.3|
|9) Sioux Falls, SD||10,861||125.0|
|10) Shreveport-Bossier City, LA||15,650||124.8|
The Bottom 10 RRI Market Forecasts
|366) Salinas, CA||9,620||52.1|
|365) Modesto, CA||10,072||53.6|
|364) Merced, CA||4,291||54.2|
|363) Madera-Chowchilla, CA||2,216||54.8|
|362) Port St. Lucie, FL||10,774||55.9|
|361) Las Vegas-Paradise, NV||41,904||56.7|
|360) Vallejo-Fairfield, CA||11,184||57.7|
|359) Stockton, CA||15,422||57.7|
|358) Detroit-Warren-Livonia, MI||91,072||59.2|
|357) Punta Gorda, FL||4,754||59.5|