Remodeling Dips but Shows Signs of Stabilization

The remodeling market slid backward during the second quarter of 2010, according to the latest National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI). The RMI (combining current and future market indicators) sank to 40.7 from 43.8 in the first quarter. Current market conditions slid back to 42.6 from 44.5 in the previous quarter. Future indicators of remodeling business declined to 38.9 from 43.1 in the last quarter.

The RMI measures market demand for current and future residential remodeling projects based on remodelers’ perceptions and indicators of future activity such as calls for bids. Any number below 50 indicates that more remodelers said market conditions are getting worse than those that reported improving conditions. The RMI has been running below 50 since the last quarter of 2005 and during the last quarter approached break even again.

“Remodelers are suffering from weak consumer confidence and constricted credit lines,” said Donna Shirey, NAHB Remodelers chairman. “Homeowners are delaying remodeling projects because of economic uncertainty.”

The current conditions indices for the remodeling market worsened in two regions: the Northeast 41.4 (from 46.6 in the first quarter) and the South 42.4 (from 44.1). However, current remodeling indices improved in the Midwest 44.7 (from 43.8) and the West 42.0 (from 34.8). Major additions fell to 44.2 (from 48.0), as did minor additions to 45.8 (from 47.3). Maintenance and repair indicators showed a milder decline to 36.6 (from 37.3).

All the indices for future remodeling business declined. Calls for bids dropped to 46.2 (from 49.4). Work committed for the next three months slumped to 27.9 (from 29.9). The backlog of remodeling jobs dipped to 37.7 (from 44.8), and appointments for proposals slid to 43.7 (from 48.1).

Responding to additional special questions in the survey, remodelers also reported on the changing composition of remodeling projects. Sixty-one percent said bathroom remodeling was one of their most common projects during the first half of 2010. Kitchen remodeling came next with 52 percent. In previous years, kitchen remodeling was reported as the most common activity by more than 70 percent of remodeler respondents.

In general, comparisons to historical data show that larger remodeling projects (such as room additions, whole-house remodeling, bathroom additions, and second-story additions) have been on the decline for several years. Smaller remodeling jobs (such as window and door replacements) have remained relatively steady or, in the case of handyman services, actually increased. For example, only 29 percent of remodelers reported that room additions were a common activity in 2010, compared to 70 percent in 2004. Conversely, none of the professional remodelers responding to the survey reported that it was common for their companies to perform handyman services in 2004, while 33 percent of remodelers were regularly providing handyman work in the first half of 2010.

“We expect the rest of 2010 to be a period of stabilization for remodeling, with the first stages of recovery emerging by the end of the year, followed by a more robust recovery beginning early next year,” said David Crowe, NAHB chief economist. “For now, professional remodelers are taking on smaller projects and working to find consumers willing to spend money despite the economic uncertainty.”

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