The National Association of Home Builders (NAHB) released its NAHB/Royal Building Products Remodeling Market Index (RMI) for the third quarter, posting a reading of 87, up five points from the third quarter of 2020. The finding is a signal of residential remodelers’ confidence in their markets, for projects of all sizes
“Demand for remodeling remains strong, and remodelers are doing quite well as long as they can adequately deal with material and labor shortages,” said NAHB Remodelers Chair Steve Cunningham, CAPS, CGP, a remodeler from Williamsburg, Virginia. “So far, a substantial share of their customers have been willing and able to tolerate the extra cost and delays of requested remodeling projects.”
The NAHB/Royal Building Products 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 components: the current market for large remodeling projects, moderately-sized projects and small projects. The Future Indicators Index is an average of 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 90, a four-point increase from the third quarter of 2020. All components also posted increases compared to the third quarter of last year: large remodeling projects ($50,000 or more) rose six points to 86, moderately-sized remodeling projects (at least $20,000 but less than $50,000) increased five points to 91 and small remodeling projects (under $20,000) inched up one point to 91.
The Future Indicator Index averaged 84, up seven points from third quarter of 2020. Both components increased as well: the current rate at which leads and inquiries are coming in rose five points to 83 and the backlog of remodeling jobs climbed eight points to 85.
“We are seeing strong demand and continued optimism in the residential remodeling market, despite the fact that supply constraints are severe and widespread,” said NAHB Chief Economist Robert Dietz. “For example, well over 90 percent of remodelers in the third quarter RMI survey reported a shortage of carpenters. And 57 percent of remodelers reported having slightly raised prices for projects over the last six months, with another 28 percent indicating a significant increase in price, due in part to higher material costs and ongoing strong demand. Half of these remodelers reported some pricing out of demand due to higher prices for remodeling projects.”
The NAHB/Royal Building Products 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. Seventy-eight percent of respondents said that the current market was “about the same” as it was three months earlier.