Volume 8, Issue 4 - April 2007
Remodeling Market Remains Steady in Slow Housing Market
Remodeling activity remained steady in the fourth quarter of 2006, according to the National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI). The current market conditions index edged up slightly from 47.8 to 48.2 on a seasonally-adjusted basis and future expectations moved up to 46.0 from 45.4. The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects.
“Remodeling retained strength across most of the country compared to late last year,” says NAHB Remodelers chairman Mike Nagel, CGR, CAPS, a remodeler from Chicago. “Certainly regional economies and housing markets play an important role, but overall we see maintenance of high levels of remodeling activity and solid future prospects.”
“Though the substantial reductions in home sales and new housing production have impacted the remodeling market to some degree, we feel that remodeling of both owner-occupied and rental housing will remain strong compared to other areas of the industry,” says NAHB chief economist Dave Seiders. “With record levels of homeowner equity and the constant need to upgrade the older housing stock, the remodeling outlook appears quite good for years to come.”
Regionally, the South reported the most growth as current conditions increased to 52.8 and future expectations moved up to 51.1. The current conditions in the West grew to 52.4 but future expectations fell to 51.3. In the Northeast, current conditions moved down to 45.7 while future expectations increased to 50.1. Only the Midwest showed declines in both indexes, with current conditions decreasing to 44.4 and future expectations lowering to 35.7.
The RMI “special questions” section asked about subcontracting. Approximately one third of a remodeling company’s work by dollar volume was subcontracted out. The median value for a general contractor’s subcontracted work in 2006 was $289,500 (with an average of $572,323), compared to the total median dollar volume of $848,214 for general contractors last year. Only 17 percent of remodelers surveyed reported acting as a subcontractor for other firms. Among all remodelers, only 2 percent of their dollar receipts came from work as subcontractors.