The National Association of Home Builders (NAHB) released its NAHB/Westlake Royal Remodeling Market Index (RMI) for the fourth quarter, posting a reading of 66, declining 17 points compared to the fourth quarter of 2021.
“Remodelers on balance remain positive about the market, but we saw how inflation took a toll on consumer budgets, causing many to pull back on projects,” said NAHB Remodelers Chair Kurt Clason, a remodeler from Ossipee, N.H.
The NAHB/Westlake Royal 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 components: the current market for large remodeling projects, moderately-sized projects and small projects. The Future Indicators Index is an average of 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 Indicators Index. Any number over 50 indicates that more remodelers view remodeling market conditions as good than poor.
The Current Conditions Index averaged 75, dropping 14 points compared the fourth quarter of 2021. All three components declined as well: the component measuring large remodeling projects ($50,000 or more) fell 14 points to 71, the component measuring moderately-sized remodeling projects (at least $20,000 but less than $50,000) dropped 13 points to 77 and the component measuring small remodeling projects (under $20,000) declined by 14 points to 77.
The Future Indicators Index fell 19 points to 58 compared to the fourth quarter of 2021. The component measuring the current rate at which leads and inquiries are coming in dropped 22 points to 52 and the component measuring the backlog of remodeling jobs decreased by 17 points to 63.
“Although the RMI was down sharply year-over-year, it is encouraging that it remains in positive territory,” said NAHB Chief Economist Robert Dietz. “NAHB expects remodeling activity to experience a slowing nominal growth rate, but to outperform new residential construction. Moreover, remodeling should start to pick up buy the end of 2023 as interest rates on home improvement loans begin to trend downward.”
The NAHB/Westlake Royal 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. Twenty-nine percent of remodelers said the market had gotten worse in the fourth quarter of 2022, compared to only 9 percent who said it had improved.