Remodeling activity grew moderately in the first quarter of 2006, according to the National Association of Home Builders’ Remodeling Market Index, released today. The current market conditions index increased from 46.6 to 48.1 and future expectations moved from 47.5 to 48.9.
The seasonally adjusted RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view market conditions as expanding.
The RMI for owner-occupied units grew from 48.9 in the fourth quarter of 2005 to 53.8, while renter-occupied units fell from 40.4 to 36.7 during the same period. In the futures expectation index, owner-occupied units moved from 50.4 to 53.2 and the renter-occupied component decreased from 37.8 to 30.4 for the first quarter of 2006. Remodeling accounts for 40 percent of all residential construction and improvement spending and almost 2 percent of the U.S. economy.
“The $11 trillion in homeowner equity continues feeding the remodeling market,” said Remodelors Council Chairman Vince Butler. “With remodeling spending surpassing $200 billion for the first time, we see continued long-term growth in the industry.”
Regionally, there was strong growth throughout the country except the West, though that area still remains well within the positive range. The Northeast’s current conditions increased by nearly 10 points from 41.6 to 51.1 and the future index jumped from 41 to 47.3. Current conditions increased in the Midwest from 41.1 to 44.3 with the future expectations increasing by .4 to 46.6.
“Though the frenzy in home buying is slowing down, the remodeling spending associated with purchasing a home usually lags behind,” said NAHB Chief Economist Dave Seiders. “The run-up in home sales during the past five years will fuel remodeling growth for the next several years, and the long-term growth looks to be solid as well.”
The RMI “special questions” section asked about the age group of homeowners who ask for remodeling work. Baby Boomers (aged 46-64) account for the vast majority of remodeling work, with 91 percent of remodelers providing service to this age group. In addition, 26 percent of remodelers serviced “Gen. X” (36-45 years old) clients, 2 percent for “Gen. Y” (35 and under), and 13 percent for Seniors (65 and older).
The RMI is based on a quarterly survey of professional remodelers, whose answers to a series of questions were assigned numerical values to calculate two separate indexes. The first index gauges current market conditions and is based on remodelers’ reports of major and minor additions and alterations, plus maintenance work and repairs, on both owner- and renter-occupied dwellings. The second index gauges expectations for the near future and is based on remodelers’ reports of their calls for bids, amount of work committed for the next three months, job backlogs and appointments for proposals.