Big-ticket remodeling spending increased 9.0% year-over-year (YOY) in the third quarter of 2020 and 1.4% from the second quarter, according to the latest Residential Remodeling Index (RRI) released by Metrostudy/Zonda. The Q3 2020 reading of 132.6 indicates economic conditions known to impact remodeling are 32.6% higher than the old peak in 2007.

The third quarter RRI marked the 34th consecutive quarter of annual and quarterly gains since national remodeling activity bottomed in 2011. However, Metrostudy/Zonda said forecasts from Moody’s Analytics for the economic and housing variables that are used in the RRI model suggest the streak of quarterly growth will come to an end in the first quarter of 2021. Beginning in the first quarter of 2021, Metrostudy/Zonda projects the RRI will see small quarterly decreases, which will lead to modest YOY decreases starting in the third quarter of 2021. The projected decreases in 2021 will be relatively moderate and the RRI is still expected to increase on an annual basis in 2021. The RRI is forecast to post a 0.4% gain for all of 2021, much lower than the 8.1% gain for the full year in 2020.

The projected moderation in remodeling growth for 2021 is mostly due to expectations of a slow employment recovery, a still-fragile economy, and the unknown status of further government stimulus, according to Metrostudy/Zonda. While September employment data indicates the U.S. has recovered 54% of jobs lost since March, Metrostuday/Zonda expressed concern that without another large round of stimulus, high-unemployment, record hospitalizations, new shutdowns, and more workers self-selecting out of the economy could be a recipe that puts the United States at risk of a “double-dip recession.” If another round of stimulus is distributed “wisely,” there is a better likelihood that the economic recovery can maintain the current baseline, according to Metrostudy/Zonda.

In 2020, Metrostudy/Zonda said the remodeling market has benefited from the injection of government stimulus, the strong existing home market, and the “K-shaped” economic recovery. During the recovery, skilled professionals whose employment situation has been relatively unchanged by the pandemic comprise the top part of the “K” and doing fine, while those on the bottom of the “K” are struggling or facing “serious near-term struggles,” according to Metrostudy/Zonda. Workers at the top of the “K” also have unleashed large amounts of pent-up spending on their homes, making upgrades with money that would have otherwise been spent on vacations or going out.

Metrostudy/Zonda projects the number of big-ticket, pro-worthy remodeling projects—worth $1,000 or more—completed in 2020 will total 14.1 million, an 8.1% increase from 2019. Metrostudy/Zonda forecasts the number of big-ticket projects completed nationally will increase by 54,000 to 14.2 million in 2021.

According to Metrostudy/Zonda, 381 metropolitan statistical areas are expected to see growth in annual project volume in 2020 and, among those markets, the average growth rate is expected to be 5.7%.

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 381 metropolitan statistical areas and nationwide.