Robust remodeling trends holding steady
Wednesday, August 15, 2018
Some regional and seasonal fluctuations notwithstanding, remodeling activity held steady during the second quarter and appears to be on track to stay that way for the remainder of the year. Market conditions within the housing industry are favoring remodelers, some of whom are reporting backlogs of up to six months on some projects.
On the whole, remodelers and designers are optimistic that business will grow in the coming months.
The National Association of Home Builders (NAHB) reports its Remodeling Market Index (RMI) for the second quarter of 2018 crept up 1 point over the previous quarter, continuing a positive trend that began in the second quarter of 2013.
Although participants indicated a slight drop in demand for both major and minor additions and renovations, they expressed increased expectations that future activity will improve (up 2 points). In addition, more of them in the second quarter noted a rise in work committed (up 2 points) and in backlogs of remodeling projects (up 9 points).
Similarly, the American Society of Interior Designers (ASID) stated that, while its Interior Design Billings Index (IDBI) slid by 6 points from May to June, designers were not overly concerned. Historically, the IDBI has pulled back in the same period by roughly 4 points, suggesting a seasonal trend.
Nearly 9 in 10 designers participating in the index expect that business conditions going forward will be good. About two-thirds anticipate revenues during the second half of 2018 will increase somewhere between 5 and 25 percent. (The IDBI measures business activity for both residential and commercial design.)
Other indicators lend support to practitioners’ optimism. More than half (51 percent) of respondents to the 2018 Houzz & Home survey said they plan to begin or continue home renovation projects this year, as did half of the homeowners cited in Home Advisor’s 2018 True Cost Report.
Estimates of remodeling activity for 2018 released by the NAHB in May project homeowners across the nation will spend on average in the neighborhood of $8,000 on home improvements this year, with averages per zip code area ranging from as low as $5,500 to as high as $18,000 or more in major metro areas.
With fewer homes for sale and the value of existing homes rising, many homeowners are choosing to stay in their current home and renovate, sometimes borrowing on the new-found equity in their homes to cover the cost. New buyers, at the same time, are shifting their priorities, purchasing available older homes in preferred neighborhoods and upgrading and expanding them to transform them into their ideal home.
A major reason for this remodeling surge, says the NAHB, is that half of the existing home stock was built before 1980. Many of these homes are owned by long-term residents who put off doing all but essential improvements during the post-recession period.
With the economic recovery improving their household wealth and financing more available, both current and new owners are now undertaking remodels and additions to update and upgrade them to reflect today’s tastes and lifestyles. Both trends should sustain the demand for remodeling and design services for some time to come.
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