Big-ticket remodeling spending increased 2.5% year-over-year in the first quarter of 2020 and 0.7% from the fourth quarter, according to the latest Residential Remodeling Index (RRI) released by Metrostudy/Zonda. The index rose to a new high of 120.4, indicating economic conditions known to influence remodeling activity are 20.4% higher than the old peak in 2007.
The RRI has posted 32 consecutive quarters of annual and quarterly growth since national remodeling activity bottomed out in 2011. However, Metrostudy/Zonda projects this streak will come to an end in 2020 due to the onset of the coronavirus (COVID-19) pandemic and its effect on the national economy and housing market.
The RRI is projected to see quarterly declines beginning in the fourth quarter of 2020, with annual decreases beginning in the first quarter of 2021. Metrostudy/Zonda projects the RRI will average an annual increase of 2% in 2020 and average an annual decline of 0.7% in 2021.
“The unprecedented shock to the U.S. economy that has occurred since mid-March, when the nation began to lockdown due to concerns over the novel coronavirus, has altered our outlook that had previously called for steady gains in national remodeling activity through 2021,” Tim Sullivan, senior managing principal at Metrostudy/Zonda, said. “Record job loss, in addition to drops in existing home sales and supply, now points to decreases in home renovation activity starting at the end of this year.”
Metrostudy/Zonda projects the number of remodeling projects worth $1,000 or more will total 13.2 million in 2020, an increase of 2.03% compared to 2019. Big-ticket exterior, basement, and kitchen and bath projects are expected to experience the largest increases in 2020 compared to the previous year, while additions, siding, and window projects will have the smallest YOY increases. Big-ticket pool projects are expected to have fewer completed projects in 2020 compared to 2019.
According to Metrostudy/Zonda, 92.7% of the 381 analyzed metropolitan statistical areas are expected to see growth in 2020 project volume, and among these markets, the average growth rate is expected to be 2.7%. Major metros in Florida (including Jacksonville, Miami-Fort Lauderdale-West Palm Beach, Orlando-Kissimmee-Sanford, and Tampa-St. Petersburg-Clearwater), Texas (including Corpus Christi and Houston-The Woodlands-Sugar Land), Colorado (including Denver-Aurora-Lakewood, Boulder, and Grand Junction), and Nevada (Las Vegas-Henderson-Paradise) are among the MSAs not projected to experience growth in project volume in 2020.
The RRI is based on a statistical model that takes into account data such as household level remodeling permits and consumer-reported remodeling and replacement projects. It uses a model to predict the number and dollar volume of home improvement and replacement projects nationwide worth at least $1,000 in 281 metropolitan statistical areas and nationwide.