The National Association of Home Builders (NAHB) and Westlake Royal’s Remodeling Market Index (RMI) posted a reading of 77 for the third quarter, declining 10 points compared to Q3 of 2021, according to a release.
“Remodelers in many parts of the country remain positive about the market,” said NAHB Remodelers Chair Kurt Clason, a remodeler from Ossipee, New Hampshire. “In some areas, however, a growing number are seeing signs of a slowdown due to the ongoing problems of labor shortages, high material prices and rising interest rates.”
According to a release, 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 survey found that 23% of remodelers said the market had gotten worse in the third quarter of 2022, compared to only 10% who said it had gotten better.
The overall RMI is calculated by averaging the Current Conditions Index (CCI) and the Future Indicators Index (FII), as stated by NAHB, and any number over 50 indicates that more remodelers view remodeling market conditions as good. The CCI is an average of three components: the current market for large remodeling projects, moderately-sized projects and small projects. The FII is an average of two components: the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects.
The CCI averaged 82, according to a release, dropping eight points from Q3 2021. All three components declined as well: large remodeling projects ($50,000 or more) fell six points to 80, moderately-sized remodeling projects (at least $20,000 but less than $50,000) dropped eight points to 83 and small remodeling projects (under $20,000) declined by six points to 85.
The FII fell 13 points to 71 compared to Q3 2021, as stated by NAHB. Both components measure also fell: leads and inquiries coming in dropped 17 points to 66, and the backlog of remodeling jobs decreased by eight points to 77.
“Home equity and ongoing strong demand for work at home and an aging housing stock are supporting demand for remodeling,” said NAHB Chief Economist Robert Dietz. “Interest rates are having a negative effect, more so on new construction than remodeling, so it’s not surprising that remodeler sentiment has so far managed to stay positive. After a decline in 2022, NAHB expects a small increase in remodeling activity in 2023, in contrast to the rate of new construction which we anticipate will continue to decline.”
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