The National Association of Home Builders (NAHB) released its Remodeling Market Index (RMI) in the first quarter of 2021, posting a reading of 86, up 38 points from the first quarter of 2020. The finding is a signal of residential remodelers' confidence in their markets, for projects of all sizes.
"The remodeling market has recovered from the pandemic and continues to grow as the economy strengthens," said NAHB Remodelers Chair Steve Cunningham, CAPS, CGP, a remodeler from Williamsburg, Virginia. "Increased household savings during the second half of 2020 have lifted budgets available for home improvement projects. However, demand is stronger than many remodelers can handle, resulting in being forced to turn work away."
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 Indicator 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.
In the first quarter, all components and subcomponents of the RMI were 82 or above. The Current Conditions Index averaged 89, a 31-point increase from the first quarter of 2020, with large remodeling projects ($50,000 or more) yielding a reading of 85, moderately-sized remodeling projects (at least $20,000 but less than $50,000) at 90 and small remodeling projects (under $20,000) with a reading of 92. These readings were all up substantially year-over-year, indicating strength for remodeling across all types of projects.
The Future Indicator Index averaged 84, up 45 points from the first quarter of 2020, with the rate at which leads and inquiries are coming in at 86 and the backlog of remodeling jobs at 82.
"The large year-over-year increase in the RMI signals a very strong recovery in remodeling activity since the onset of the pandemic, and activity should continue to grow into 2021 as the economy accelerates with an easing of the pandemic," said NAHB Chief Economist Robert Dietz. "However, material availability and prices continue to be a challenge for remodelers and their customers."
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 first quarter, 41 percent of respondents indicated that the market is 'better' and only 4 percent rated it 'worse' than the fourth quarter of 2020.