Americans keep upgrading their homes, but NAHB’s index measuring the market dropped 10 points year-to-year in the second quarter, reflecting a market slowdown.
WASHINGTON – The remodeling market noticeably slowed in the second quarter of 2022, according to the National Association of Home Builders’ (NAHB) NAHB/Westlake Royal Remodeling Market Index (RMI).
At 77, the RMI score still reflected market optimism, but that’s a 10-point year-to-year drop.
“Although most remodelers across the country are still positive about the market, a growing number are starting to experience symptoms of a slowdown,” says NAHB Remodelers Chair Kurt Clason. “Some customers are showing a reluctance to go forward with projects due to the higher costs and delays associated with material shortages, as well as higher interest rates.”
The NAHB/Westlake Royal 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 measures attitudes about three components today: large remodeling projects, moderately-sized projects and small projects. The Future Indicators Index measures two components: the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects.
The overall RMI averages the Current Conditions Index and the Future Indicators Index. Any number over 50 indicates that more remodelers view remodeling market conditions as good rather than poor.
Current Conditions Index: At 83, this index dropped 8 points year-to-year, with a decline in all three components:
- Large remodeling projects ($50,000 or more) fell 11 points to 79
- Moderately-sized remodeling projects (at least $20,000 but less than $50,000) dropped seven points to 84
- Small remodeling projects (under $20,000) declined by six points to 86
Future Indicators Index: At 72, this index dropped 11 points year-to-year:
- The current rate at which leads and inquiries are coming in fell 13 points to 68
- The component measuring the backlog of remodeling jobs decreased by 10 points to 76
“The RMI remains firmly in positive territory above 50 but has declined on a year-over-year basis, particularly the RMI component for large remodeling projects over $50,000,” says NAHB Chief Economist Robert Dietz. “This suggests some weakness in the market and is consistent with NAHB’s projection that residential remodeling spending, like new residential construction, will be down in 2022.”
Still, Dietz says he expects remodeling to keep outperforming single-family construction in 2022 and 2023 in terms of growth rates.
The NAHB/Westlake Royal 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. Twenty-one percent of remodelers said the market had gotten worse in the second quarter of 2022, compared to only 11% who said it had gotten better. This is the first time the “worse” has exceeded the “better” percentage since the first quarter of 2020 (the quarter of the onset of the pandemic).
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