May 9 2007
Remodeling activity eroded slightly in the first quarter of 2007, according to the National Association of Home Builders' (NAHB) Remodeling Market Index (RMI). The current market conditions index slipped from 48.2 to 46.1 on a seasonally adjusted basis while future expectations edged up to 46.5 from 46.0. The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects, and 50 is normally the dividing line between a growing and contracting market.
"Compared to the major up-and-down cycles of the new home market, remodeling activity remains fairly steady," said NAHB Remodelers Chairman Mike Nagel, CGR, CAPS, a remodeler from Chicago. "A significant part of the remodeling market comes from work that home owners cannot delay - like replacing a roof - keeping the industry relatively stable during housing market downswings."
Regionally, the Midwest showed comparatively strong RMI readings in the first quarter, as current conditions increased to 47.5 from 44.4 and future expectations jumped to 44.7 from 35.7. Other areas of the country reported declines in their RMI components. Current conditions in the Northeast moved from 45.7 to 43.4 and future expectations lowered to 44.3 from 50.1. In the South, current conditions lowered to 45.9 from 52.8 and future expectations moved slightly from 51.1 to 50.7. Current conditions in the South decreased from 52.4 to 48.2 and future expectations moved from 51.3 to 45.0.
"The remodeling industry certainly benefited from the record numbers of home sales during 2004-2005, and the subsequent spending on home customization that follows housing turnover," said NAHB Chief Economist David Seiders. "The remodeling market shows relatively strong activity despite the substantial downswings in home sales and new home starts since early last year, and we feel that the trillions of dollars in homeowner equity will help buoy the remodeling market in the near future and drive long-term growth as well."
In the owner and rental components of the RMI, current activity for owner-occupied units decreased from 49.7 to 47.7, while the rental component edged up slightly from 44.1 to 44.5. The future expectations for owner-occupied units increased to 46.4 from 45.6 while the rental component moved down by one point to 41.1.
The RMI "special questions" section profiled the head of remodeling firms. More than half of the operating heads completed college (53 percent), with 12 percent earning an advanced degree from graduate school. When asked about years in the business, 65 percent reported 20 years or more of remodeling experience. About a quarter (26 percent) reported having 10-19 years of remodeling experience, six percent with five to nine years, three percent with two to four years, and no respondents reported less than two years experience. Overall, 96 percent of remodeling firms are led by men, compared to four percent for women.