The National Association of Home Builders (NAHB) released its NAHB/Royal Building Products Remodeling Market Index (RMI) for the second quarter, posting a reading of 87, up 14 points from the second quarter of 2020. The finding is a signal of residential remodelers’ confidence in their markets, for projects of all sizes.
“Remodelers in many parts of the country are experiencing very strong demand for their services,” said NAHB Remodelers Chair Steve Cunningham, CAPS, CGP, a remodeler from Williamsburg, Virginia. “So far, remodelers have been able to accommodate most customers, but as the backlog of projects in the pipeline grows, there is a tendency for them to take longer to start and complete.”
The RMI survey asks remodelers to rate five components of the remodeling market as “good,” “fair” or “poor.” Each question is measured on a scale from 0 to 100, where an index number above 50 indicates that a higher share view conditions as good than poor.
The Current Conditions Index is an average of three of these components: the current market for large remodeling projects, moderately-sized projects and small projects. The Future Indicators Index is an average of the other two components: the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects. The overall RMI is calculated by averaging the Current Conditions Index and the Future Indicator Index. Any number over 50 indicates that more remodelers view remodeling market conditions as good than poor.
The Current Conditions Index averaged 91, a 14-point increase from the second quarter of 2020. All components also posted increases compared to the second quarter of last year: large remodeling projects ($50,000 or more) jumped 20 points to 90, moderately-sized remodeling projects (at least $20,000 but less than $50,000) increased 13 points to 91 and small remodeling projects (under $20,000) rose nine points to 92.
The Future Indicator Index averaged 83, up 13 points from second quarter of 2020. Both components increased as well: the current rate at which leads and inquiries are coming in rose nine points to 81 and the backlog of remodeling jobs jumped 19 points to 86.
“As the market attempts to balance the number of households that want homes and the number of homes available, the value of homes is rising, helping to fuel demand for remodeling,” said NAHB Chief Economist Robert Dietz. “This has been sufficient to keep remodelers optimistic, despite the significant headwinds of labor and material shortages. And while there has been some easing of framing lumber prices, prices for other materials like OSB remain significantly high—OSB is up more than 500 percent since the start of 2020.”
The RMI was redesigned in 2020 to ease respondent burden and improve its ability to interpret and track industry trends. As a result, readings cannot be compared quarter to quarter until enough data are collected to seasonally adjust the series. To track quarterly trends, the redesigned RMI survey asks remodelers to compare market conditions to three months earlier, using a ‘better,’ ‘about the same,’ ‘worse’ scale. In the second quarter, 30 percent of respondents indicated that the market is ‘better’ and only 9 percent rated it ‘worse’ than the first quarter of 2021.