The National Association of Home Builders (NAHB) released its Remodeling Market Index (RMI) in the third quarter of 2020, posting a reading of 82. The finding is a signal of residential remodelers’ strong confidence in their markets, for projects of all sizes. The demand for home improvement is robust given the importance of home for Americans as the economy recovers and adapts from the impacts of Covid-19.
“With refinancing activity surging, home owners are investing in their homes, which is sustaining strong demand for remodeling,” said NAHB Remodelers Chair Tom Ashley, Jr., CAPS, CGP, CGR, a remodeler from Denham Springs, La. “As a result of the rapid changes for work and the economy after the virus-induced recession, homes are serving multiple roles such as school, office and gym. This has directly increased the demand for improvements.”
The RMI survey 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 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) with a reading of 90. These readings indicate that the strength for remodeling is felt across all types of projects.
The Future Indicators Index averaged 77, with the rate at which leads and inquiries are coming in at 78 and the backlog of remodeling jobs at 77.
“The third quarter RMI reading of 82 indicates strong remodeler sentiment, as business has strengthened as home owners focus on the importance of home for work and life amidst the pandemic and its consequences,” said NAHB Chief Economist Robert Dietz. “However, remodelers are reporting double-digit percentage increases for material pricing, as delays in obtaining materials have become a critical near-term challenge due to disrupted supply-chains. Nonetheless, the third quarter RMI is another indicator showing that housing is the bright spot of the economy.”
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’ and only 6 percent rated it “worse.”