Homebuilders Report Steep Uptick in Remodeling Demand

Declaring that the decline in remodeling activity may be reaching an end, the National Association of Homebuilders (NAHB) released the results of its Remodeling Market Index (RMI) for the first quarter of 2010. 

The three part index measures remodelers' perceptions of market demand for current and future residential remodeling projects.  Any result below 50 indicates that more respondents feel that the market is getting worse than indicate it is improving.   

The data is collected and reported to include impressions of both the current and impending market and NAHB has created a new unified index combining the two perceptions.  The first segment of the index measuring current market conditions jumped to 47.0 from 36.4 in the fourth quarter of 2009.  The index of remodeler perceptions of future conditions had an even greater improvement, soaring to 48.9 from 31.4.  The unified measure was up from 33.9 in the previous quarter to 47.9

The RMI has been consistently below 50 since the fourth quarter of 2005 and dipped into the low 20s in the fourth quarter of 2008.  This is the best showing for the index since Quarter 1 of 2006.

"Although the overall RMI and most of its components are still slightly below the break-even point of 50, the recent improvements suggest that the remodeling market may soon reach its bottom and begin to grow in the coming months," said NAHB Chief Economist David Crowe. "However, professional remodelers are still operating in a highly competitive marketplace and dealing with consumers who are uncertain about the future."

Summary indices for future market indicators swelled substantially with calls for bids jumping to 56.3 (from 37.5 in fourth quarter 2009)) and appointments for proposals soaring to 59.2 (from 34.4). The amount of work committed for the next three months expanded to 33.0 (from 21.9) and the backlog of remodeling jobs also strengthened to 47.2 (from 31.9).

Builder expectations for major additions increased to 53.8 from 40.0 and for minor additions to 49.6 from 40.7.  Perceptions of current and future work on maintenance and repair grew to 36.6 from 27.1.

The index of current conditions improved in three regions; only the West showed a continued deterioration in builders' perceptions, dipping to 36.6 from 41.7.  In the Northeast the current condition index had a huge increase from 27.7 in the fourth quarter to 45.8. The index increased from 37.5 to 37.0 in the Midwest and 40.0 to 49.0 in the South. 

NAHB Remodelers Chairman Donna Shirey said of the data, "Remodelers are receiving more calls for work, but getting signed contracts is still challenging. We're working a little more, but not making more due to tighter margins, onerous federal regulations, and consumer anxiety about making large purchases.