Remodeling Outlook ‘Robust’ for 2018
Two key measures of U.S. home remodeling activity report a strong outlook for 2018,
The Leading Indicator of Remodeling Activity from the Joint Center for Housing Studies of Harvard University, Cambridge, Mass., projects homeowner spending on improvements and repairs will approach $340 billion in 2018, an increase of 7.5 percent from estimated 2017 spending.
And the National Association of Home Builders’ Remodeling Market Index posted a reading of 60 in the fourth quarter, up three points from the previous quarter and only the second time since 2001 the reading has reached that level.
Chris Herbert, Managing Director of the Joint Center for Housing Studies, said the coming year is expected to be “robust” for residential renovations and repairs with growth accelerating as the year progresses.
“Steady gains in the broader economy, and in home sales and prices, are supporting growing demand for home improvements,” Herbert said. “We expect the remodeling market will also get a boost this year from ongoing restoration efforts in many areas of the country impacted by last year’s record-setting natural disasters.”
Abbe Will, Research Associate in the Remodeling Futures Program at the Joint Center, said despite continuing challenges of low for-sale housing inventories and contractor labor availability, 2018 could post the strongest gains for home remodeling in more than a decade. “Annual growth rates have not exceeded 6.8 percent since early 2007, before the Great Recession hit,” she said.
NAHB Remodelers Chair Joanne Theunissen said for 19 consecutive quarters, the RMI has been at or above 50, which indicates that more remodelers report market activity is higher compared to the prior quarter than report it is lower.
“A booming stock market and low unemployment continue to fuel consumers’ investment in their homes,” Theunissen said. “Natural disaster-related repairs also caused strong demand for maintenance and repair projects.”
NAHB said current market conditions increased four points from the third quarter of 2017 to 60. Among its three major components, major additions and alterations jumped seven points to 60, minor additions and alterations increased three points to 59, and the home maintenance and repair component rose three points to 61.
The future market indicators index rose one point from the previous quarter to 59. Calls for bids decreased two points to 56, amount of work committed for the next three months rose two points to 58, the backlog of remodeling jobs gained a significant six points to 66 and appointments for proposals fell two points to 57.
“At a high of 60, the RMI is consistent with the strong growth in home improvement spending in 2017,” said NAHB Chief Economist Robert Dietz. “However, the surge in the backlog of remodeling jobs likely reflects supply-side challenges remodelers are facing in the form of skilled labor shortages and rising material prices.”
