Real estate remodeling activity was steady in the fourth quarter of 2006, as the two indexes that make up the National Association of Home Builders’ Remodeling Market Index (RMI) grew at a snail’s pace.
The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects, with any number over 50 indicating that the majority of remodelers view market conditions as improving. The current market conditions index edged up slightly from 47.8 to 48.2 on a seasonally adjusted basis, and future expectations moved up to 46 from 45.4.
“Remodeling retained strength across most of the country compared to late last year,” said NAHB Remodelers Chairman Mike Nagel, a remodeler from Chicago. “Certainly regional economies and housing markets play an important role, but overall we see maintenance of high levels of remodeling activity and solid future prospects.”
The RMI component for the rental market indicated a strong increase in activity for that sector in the fourth quarter of 2006. The current conditions index for renter-occupied markets increased from 38.8 to 44.1, while current conditions in owner-occupied units decreased from 51.4 to 49.7. The future expectations for the renter-occupied units also grew from 37.1 to 42.4, and owner-occupied units edged up from 45 to 45.6.
Regionally, the South reported the most growth, as current conditions increased to 52.8 and future expectations moved up to 51.1. The current conditions in the West grew to 52.4, but future expectations fell to 51.3. In the Northeast, current conditions moved down to 45.7, while future expectations increased to 50.1. Only the Midwest showed declines in both indexes, with current conditions decreasing to 44.4 and future expectations lowering to 35.7.
The RMI “special questions” section asked about subcontracting. Approximately one third of a remodeling company’s work by dollar volume was subcontracted out. The median value for a general contractor’s subcontracted work in 2006 was $289,500 (with an average of $572,323), compared with the total median dollar volume of $848,214 for general contractors last year. Only 17 percent of remodelers surveyed reported acting as a subcontractor for other firms. Among all remodelers, only 2 percent of their dollar receipts came from work as subcontractors.
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. A variety of “special questions” are also asked at the end of the survey to help pinpoint market trends.