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Remodeling Spending to Accelerate by 2011
In January 2010, the National Association of Home Builders predicted that remodeling would pick up in the second quarter of 2010 and chart growth at a nearly 45 degree incline by the end of the year.
So far, the outlook is correct. Remodeling is indeed picking up again.
In May, the NAHB’s Remodeling Market Index (RMI) rose to 47.0 in Q1 2010 from 36.4 in Q4 2009. Future indicators leapt from 31.4 to 48.9. It’s the best showing in builder confidence since Q1 2006.
The RMI index represents the number of remodeling professionals who say market conditions are improving or declining. A number above 50 suggests optimism, and below 50 suggests pessimism. NAHB remodelers reported more requests for work, but tighter margins due to greater competition and consumer anxiety.
In other words, it’s a good time to remodel your home. Workers are available, and prices are attractive, but they won’t stay long at bargain rates.
“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 in May. “However, professional remodelers are still operating in a highly competitive marketplace and dealing with consumers who are uncertain about the future.”
Adding to the chorus of recovery is the Joint Center for Housing Studies of Harvard University. The latest Leading Indicator of Remodeling Activity (LIRA) also points to growth that will accelerate to the double-digit range by Q1 2011.
“Absent a reversal of recent economic progress, there should be a healthy upturn in home improvement activity by year-end and into next year,” forecasts Eric S. Belsky, managing director of the Joint Center for Housing Studies.
Among the reasons experts are predicting a remodeling renaissance is a growing trend of investing in the home again, from simple replacement projects to larger-scale remodeling.
The LIRA estimates national homeowner spending on improvements for the current quarter and subsequent three quarters, and measures an annual rate of change.
ServiceMagic.com noticed a 37% leap in remodeling services between Q4 2008 and Q4 2009 in its Home Remodeling and Repair Index. By May, 2010, the company announced a 49% improvement between Q1 2009 and Q1 2010.
Among the reasons for the growth is greater spending on larger remodeling projects, as well as core home improvement projects such as window and roof replacement. Specifically, kitchen remodels were up nationwide by 191% year-over-year. Bathroom remodels increased 30 percent.
So why is home improvement on the rise? With a slowdown in housing sales, a spate of upside-down mortgages, and declining home values, homeowners chose to bloom where they were planted.
Since May, consumer confidence has continued to improve.