Though more contractors are reporting business is slower than those who say it is higher, remodeling sentiment rose to the highest level in five years in the fourth quarter of 2011.
The National Association of Home Builders (NAHB) reports that its Remodeling Market Index (RMI) increased from 41.7 in the third quarter of 2011 to 46.6 in the fourth quarter. The RMI component measuring current market conditions rose to 48.4 from 43.0 in the previous quarter, and the RMI component measuring future indicators of remodeling business also increased to 44.8 from 40.4 in the previous quarter, according to the NAHB.
An RMI below 50 indicates that more remodelers report market activity is lower (compared to the prior quarter) than report it is higher. The overall RMI averages ratings of current remodeling activity with indicators of future activity.
“As more consumers remain in their homes rather than move in this economy, remodelers benefited from a gradual increase in home improvement activity, taking us to a five-year high,” NAHB Remodelers Chairman Bob Peterson, CGR, CAPS, CGP, a remodeler from Fort Collins, says. “2011 ended on a strong note for the remodeling industry.”
Current market conditions improved significantly in all four regions over the third quarter of 2011. And the RMI reports higher market activity in two important categories: major additions 52.3 (from 45.2) and minor additions 50.1 (from 45.7).
Future market indicators in each region also experienced gains from the previous quarter. Two of the indices reported a level higher than 50: calls for bids at 50.7 (from 45.4) and appointments for proposals at 50.1 (from 43.3), while work committed for the next three months only rose to 31.5 (from 29.9).
“With several key components above 50, the latest RMI provides reason for guarded optimism going forward,” says NAHB Chief Economist David Crowe. “The residential remodeling market has been improving gradually, mirroring the trend in other segments of the housing market. Stringent lending requirements and economic uncertainty continue to be a drag on demand, but we expect a modest growth in remodeling activity to continue throughout 2012.”