Remodeling Outlook ‘Robust’ for Next 12 Months
Homeowners are expected to increase spending on improvements and repairs at a solid clip over the coming year, according to the Joint Center for Housing Studies of Harvard University, Cambridge, Mass., and the National Association of Home Builders.
The Joint Center Leading Indicator of Remodeling Activity projects annual growth in homeowner remodeling expenditure will taper somewhat in the first half of 2019, but still remain around 7 percent. The NAHB Remodeling Market Index rose by one point in the second quarter, but its futures index jumped by four points
“A growing economy and stronger job market are boosting owners’ willingness to invest in home improvements,” says Chris Herbert, Managing Director of the Joint Center for Housing Studies. “Rising home values and increased home equity levels are also encouraging more owners to do larger upgrade and replacement projects.”
Abbe Will, Associate Project Director in the Remodeling Futures Program at the Joint Center, noted although the projected growth for remodeling activity remains strong, the low inventory of existing homes for sale is holding back even larger gains, since significant remodeling and repair often occurs around the time of a sale. “Even so, annual spending on residential improvements and repairs by homeowners is expected to reach nearly $350 billion by the middle of next year,” she said.
The NAHB Remodeling Market Index posted a reading of 58 in the second quarter, up one point from the previous quarter. The RMI has been consistently above 50–indicating that more remodelers report market activity is higher than lower–since second quarter 2013. Current market conditions decreased one point from the first quarter of 2018 to 57. Among its three major components, major additions and alterations waned one point to 55, minor additions and alterations decreased two points to 58, and the home maintenance and repair component rose two points to 59.
“Remodelers across the country continue to see demand,” said NAHB Remodelers Chair Joanne Theunissen, a remodeler from Mt. Pleasant, Mich. “However, the rising cost of materials is impeding the market’s ability to be even stronger.”
The future market indicators gained four points from the previous quarter to 59. Calls for bids fell two points to 55, amount of work committed for the next three months increased two points to 56, the backlog of remodeling jobs jumped nine points to 66 and appointments for proposals rose seven points to 61.
“Improving economic growth is supporting demand for home remodeling,” said NAHB Chief Economist Robert Dietz. “However, remodelers have to deal with rising material prices, especially lumber, and the continued shortage of labor to keep prices competitive. The labor shortage is also a factor contributing to the increasing backlog of remodeling jobs.”
