Remodeling Index Signals Bullish Outlook - Pro Construction Guide

Remodeling Index Signals Bullish Outlook

Remodeling contractors reported significant upticks in remodeling activity in the fourth quarter, indicating a bullish outlook for 2020, according to a recent quarterly survey from the National Association of Homebuilders (NAHB).

The NAHB said its Remodeling Market Index (RMI) rose three points to reach 58 in the fourth quarter of 2019 due to an increase in activity during the period, as well as a rise in future market indicators to their highest levels in five years.

Future market indicators gained three points to 60 — only the second time this level has been reached since 2000. The increase was driven by a:

  • Three-point increase in calls for bids.
  • Three-point increase in the amount of work committed for the next three months.
  • Five-point increase in backlog of remodeling jobs.
  • Two-point increase in appointments for proposals.

Despite the bullish outlook, the NAHB’s most recent remodeling forecast calls for spending on remodeling of owner-occupied single-family homes to slip 0.6 percent in 2020 and increase 1.2 percent in 2021.

“The biggest factors prohibiting stronger growth is mainly the ongoing labor shortage,” said Paul Emrath, Ph.D., NAHB’s assistant vice president for surveys and housing policy research.

In the United States, residential remodeling work generally tracks construction of new single-family homes, which rose 10 percent in 2019 to their highest levels since the Great Recession.

Although the economy is slowing slightly, the risk of a recession is low, and remodeling should keep pace with inflation into 2021.

“We’re not only seeing more requests for proposals because the housing stock is limited, but also a higher request for aging-in-place work because boomers want to stay in their homes longer,” said Nick Scheel, a Certified Graduate Remodeler (CGR) from Spokane Valley, Wash. “Because people are choosing to stay in their homes, the demand and backlog for remodeling remains high.”

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