The National Association of Home Builders (NAHB) released its NAHB/Royal Building Products Remodeling Market Index (RMI) for the fourth quarter, posting a reading of 83, up four points from the fourth quarter of 2020. The finding is a signal of residential remodelers’ confidence in their markets, for projects of all sizes.
“Higher home equity provided resources for home owners to improve their existing homes, supporting high demand for remodeling,” said NAHB Remodelers Chair Steve Cunningham, CAPS, CGP, a remodeler from Williamsburg, Virginia. “Many remodelers are completely booked well into the future, however, supply chain problems continue to delay projects and make it difficult to work off the backlog.”
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 Indicators Index. Any number over 50 indicates that more remodelers view remodeling market conditions as good than poor.
The Current Conditions Index averaged 89, a four-point increase from the fourth quarter of 2020. All components also posted increases compared to the fourth quarter of last year: large remodeling projects ($50,000 or more) climbed seven points to 85, moderately-sized remodeling projects (at least $20,000 but less than $50,000) rose two points to 90 and small remodeling projects (under $20,000) increased two points to 91.
The Future Indicators Index averaged 77, up five points from the fourth quarter of 2020. Both components increased as well: the current rate at which leads and inquiries are coming in rose three points to 74 and the backlog of remodeling jobs climbed increased seven points to 80.
“The year-over-year increase in the RMI indicates ongoing strength in the remodeling market, although it is important to note the survey data were collected in late December and early January and do not fully capture recent increases in interest rates,” said NAHB Chief Economist Robert Dietz. “Going forward, NAHB expects remodeling activity to continue to grow in 2022, although not as fast as it did in 2021.”
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-two percent of respondents said that the current market was “about the same” as it was three months earlier.