Riding on the heels of historically low interest rates and a solid level of consumer confidence, the National Association of Home Builders Remodeling Market Index (RMI) posted a strong third quarter. Today’s third-quarter results moved one point ahead of the seasonally adjusted second quarter in 2004.

“This has been an amazing year for remodeling,” said NAHB Remodelors Council Chairman Douglas Sutton Sr., a remodeler in Springfield, Ill. “With home sales remaining record-breaking, the major additions and alterations sector has kept many remodelers busy with continually growing backlogs.”

The RMI is derived from a quarterly national survey of 500 remodelers. The current market conditions index moved one point, from 50.6 last quarter to 51.8. The future expectations index remained unchanged from last quarter at 52.4.

Regionally, the Southern part of the country remained virtually the same in current activity, at 54.7, but gained nearly 4 points in future expectations, moving from 53.3 to 57. The Western section posted the highest growth in both current and future expectations rising from 54 to 56.9 and 58.5 to 62.3, respectively. The Midwest posted a mixed bag as it showed a minor slow down in current activity, dropping from 47.5 to 46.6 and a minor rebound in future expectations, moving from 43.3 to 44.4. The Northeast saw the biggest fall, dropping from 57.1 to 52.8 in current activity and 57.7 to 56.2 in future expectations. This is the first time the RMI is seasonally adjusted.

“With the ongoing favorable interest rates, rising employment and household incomes, and high home price appreciation rates, we expect the remodeling market to remain on a strong growth path,” said NAHB Chief Economist David Seiders. “The RMI is still above 50, which signals that the market remains healthy. All indicators point to another booming year for remodeling in 2004 and the outlook for 2005 is quite good as well.”

The market saw a jump in terms of major additions and alterations moving from 47.4 in the second quarter of 2004 to 49.2 in the third quarter, but declined somewhat for minor additions and alterations during the same period. Following a drop in the second quarter, the RMI’s maintenance and repairs component saw a rebound in the third quarter, moving from 51.8 to 54.6. As in other recent quarters, the strength of remodeling activity was heavily concentrated in the owner-occupied component of the market.

The RMI “special questions” section surveyed participants about where remodeling companies buy materials and who influences purchasing decisions during projects.

Remodelers responding to the survey reported that specialty distributors are the number one source for windows, doors, and patio doors, followed by wholesale distributors and home improvement centers. Carpeting and flooring are generally purchased from specialty retailers followed by subcontractors and wholesale distributors. About 80 percent of the remodelers reported purchasing lumber structural panels and particle board from lumberyards. Lumberyards are also the primary source for siding, followed by wholesale distributors. The most common source for plumbing fixtures is through subcontractors/installers followed by wholesale distributors.

In questions asked about who influences purchase decisions during projects responses were equally split between the remodeling contractor and the homeowner choosing materials. The survey showed that the contractor is more likely to choose hardware materials such as windows, doors, roofing, lumber, siding and lighting. Whereas the homeowner has more influence when it comes to product selection such as appliances, plumbing fixtures, flooring, carpeting and cabinets. But both the homeowner and remodeler split on who influences paint selections.

***

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