Remodeling Industry Confidence Surges in Third Quarter
The National Association of Home Builders’ Remodeling Market Index (RMI) posted a reading of 82 in the third quarter, indicating remodelers’ strong confidence in their markets, for projects of all sizes (Table 1). The strong RMI reading is a reflection of more Americans investing in home remodeling projects as they adapt to the impacts of the coronavirus pandemic.
|The current market for large remodeling projects ($50,000 or more) in the area you operate.|
|The current market for moderately-sized remodeling projects (at least $20,000 but less than $50,000) in the area where you operate.|
|The current market for small remodeling projects (under $20,000) in the area where you operate.|
|The current rate at which your leads and inquiries are coming in.|
|Your current backlog of remodeling projects.|
The RMI is based on a survey that asks remodelers to rate five components of the remodeling market as “good,” “fair” or “poor.” Each question is measured on a scale from 0 to 100, where an index number above 50 indicates that a higher share view conditions as good than poor.
The Current Conditions Index is an average of three of these components: the current market for large remodeling projects, moderately-sized projects and small projects. The Future Indicators Index is an average of the other two components: the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects. The overall RMI is calculated by averaging the Current Conditions Index and the Future Indicator Index. Any number over 50 indicates that more remodelers view remodeling market conditions as good than poor.
In the third quarter, all components and subcomponents of the RMI were 77 or above. The Current Conditions Index averaged to 86, with large remodeling projects ($50,000 or more) yielding a reading of 80, moderately-sized remodeling projects (at least $20,000 but less than $50,000) at 86 and small remodeling projects (under $20,000) at 90. These readings indicate that the strength for remodeling is felt across all project sizes.
Meanwhile, the Future Indicators Index averaged to 77, with the rate at which leads and inquiries are coming in at 78 and the backlog of remodeling jobs at 77.
Demand for remodeling has surged as homeowners shift to spending more time at home in the midst of the coronavirus pandemic. Although demand is strong, it is important to note that remodelers face serious supply-side challenges, particularly with material pricing and availability. In fact, remodelers reported double digit percentage increases in the price of key materials, compared to six months ago. And materials like lumber and appliances are experiencing delivery delays, extending projection completion times.
The RMI was redesigned in 2020 to ease respondent burden and improve its ability to interpret and track industry trends. As a result, readings cannot be compared quarter to quarter until enough data are collected to seasonally adjust the series. To track quarterly trends, the redesigned RMI survey asks remodelers to compare market conditions to three months earlier, using a ‘better,’ ‘about the same,’ ‘worse’ scale. In the third quarter, 52 percent of respondents indicated that the market is ‘better’ while only 6 percent rated it “worse.”—
For the full RMI tables, please visit http://www.nahb.org/rmi.