The Remodeling Market Index (RMI) dropped sharply in the third quarter of 2008, reflecting widespread pessimism – and scattered pockets of optimism – among the 500 remodelers surveyed in the National Association of Home Builders’ quarterly report.
Signifying two historic lows since the RMI’s debut in 2001, the “current market conditions” indicator slid to 33.5 in the third quarter, from 41.8 in the second quarter. The “future expectations” indicator dropped even more, from 38.0 to 27.7
The remodeling equivalent of the consumer confidence survey, the RMI measures remodelers’ perceptions of market demand for their work. Any number over 50 indicates that the majority of remodelers view market conditions as improving. The national RMI has been running below 50 since the fourth quarter of 2005. It peaked in the first quarter of 2004, hitting 56.9 for current conditions and 57.8 for future expectations.
Big Jobs, Backlogs Plummet
Big projects appear to be slowing most dramatically. Nationally, the current expectations indicator for “major additions and alterations” costing $25,000 or more plummeted to 23 for homeowners, down from 41.83, but dropped only to 36.6 for renters. “Minor additions and alterations” appear to be on stronger ground; for owners, the index was 53.07, though considerably lower (19.81) for renters.
Other indicators that experienced sharp declines include “calls for bids,” which dropped from 40.16 for owners and renters combined to 28.95; “backlog of remodeling jobs,” which plunged from 42.13 to 29.26 for both groups, and “appointments for proposals,” which dropped from 40.41 to 29.32.
Regionally, most parts of the country reported declines. The sharpest regional drop was in the West, where the index for future expectations fell from 42.1 to 25.5. A modest exception was the Northeast, where the index for future expectations climbed from 30.9 to 35.
Anecdotal reports are more mixed, says Kelly Mack, communications manager for NAHB Remodelers. “A number of members said business is very good. We hear positive things about green and CAPS [certified aging in place], and some areas are booming,” including, members tell her, the Houston market.
Energy Upswing
In another small bright spot, remodelers cited increased demand for energy-efficiency improvements, citing a 26% increase in calls overall for improved home energy efficiency. Low-energy windows remained the top customer request, followed by upgraded insulation, insulated exterior doors, high-efficiency HVAC systems, argon gas windows, ceiling fans, water-saving faucets and fixtures, and programmable thermostats.
For more information on the RMI and a detailed look at third-quarter findings, click here.