The Remodeling Market Index (RMI) continued to climb at a modest pace in the third quarter of 2013, rising two points to 57, the highest reading since the first quarter of 2004, according to the National Association of Home Builders (NAHB).
An RMI above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity. The RMI’s current market conditions index rose from 54 in the previous quarter to 58, the highest reading since the creation of the RMI in 2001, driven partly by rising existing home sales.
“The growth in home equity and home sales prompted homeowners to remodel as they prepare to move or undertake upgrades that they put off during tough times,” said NAHB Remodelers Chairman Bill Shaw, a remodeler from Houston. “NAHB Remodelers looks forward to continuing our tradition of professional service and craftsmanship as the housing recovery makes progress.”
All three major components of the RMI’s current market conditions index increased in the third quarter. Major additions and alterations increased from 51 to 55, minor additions and repairs from 55 to 58, and maintenance and repair from 57 to 59. The future market indicators component of the RMI remained even with the previous quarter’s reading of 56.
Regionally, the RMI registered two consecutive quarters of gains in the Northeast, Midwest, and West. In the South, the RMI edged down slightly in the third quarter after a five-point gain during the previous quarter. All four regions were above 50 and higher in the third quarter than in the first quarter of 2013.
“In addition to existing home sales, which support remodeling activity as owners fix up their homes before and after a move, remodeling has benefitted from rising home values,” said NAHB Chief Economist David Crowe. “This boosts home equity that owners can tap to finance remodeling projects. We expect existing home sales and house prices to increase, but at a slower rate over the next year. The demand for remodeling services should also increase, but more gradually over that period.”
The RMI is based on a quarterly survey of professional remodelers, whose answers to a series of questions were assigned numerical values to calculate two separate indexes. The first index gauges current market conditions and is based on remodelers’ reports of major and minor additions and alterations, plus maintenance work and repairs, on both owners- and renter-occupied dwellings. The second index summarizes indicators of future remodeling activity and is based on remodelers’ responses to questions about calls for bids, amount of work committed for the next three months, job backlogs, and appointments for proposals.
NAHB Remodelers represents the more than 24,000 remodeling industry members of the NAHB. Founded in 1982, the organization provides information, education, and designation programs to improve the business and construction expertise of its members and enhance the professional image of the industry. Its membership incorporates 148 local councils in 45 states.