The home remodeling industry is getting a little extra boost to celebrate home improvements nationally, even though the market is already moving full steam ahead.
The National Association of the Remodeling Industry and the National Association of Home Builders are advocating improvements, repairs and additions this month, but two of the housing industry’s leading indexes indicate there’s already a lot of hammering happening.
NAHB’s Remodeling Market Index (RMI) and Harvard’s Leading Indicator of Remodeling Activity (LIRA) report that after the first quarter of 2018, activity continues to move forward following a strong finish in 2017.
In April, the RMI and LIRA indexes suggest continued strength in the owner-occupied and rental property remodeling sectors.
And the prognosis for the remainder of the year and into 2019 looks pretty good.
LIRA projects remodeling, repair spending to grow over 7 percent
Earlier this year, LIRA projected that homeowner spending on improvements and repairs will increase about 7.5 percent from estimated 2017 spending because of a robust economy and recovery from natural disasters.
So far, that’s holding true. Compiled by the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University, LIRA says growth of homeowner remodeling dollars will remain above 7 percent through the year and into the first quarter of 2019.
LIRA, which provides a short-term outlook of national home improvement and repair spending to owner-occupied homes, estimates the current remodeling and repair market to be $340 billion. The indicator, which projects the annual rate of change in spending for the current quarter and subsequent four quarters, is intended to help identify future turning points in the home improvement and repair industry.
“Strengthening employment conditions and rising home values are encouraging homeowners to make greater investments in their homes,” says Chris Herbert, Managing Director of the Joint Center for Housing Studies. “Upward trends in retail sales of building materials and the growing number of remodeling permits indicate that homeowners are doing more – and larger – improvement projects.”
Rental properties bouncing back with more minor additions, alterations
NAHB’s Remodeling Market Index (RMI), which tracks owner-occupied and rental property upgrades, shows similar strength in the first quarter after posting a record-high 60 in the last three months of 2017. But strong showings in minor additions and alterations (with a 57) overshadowed bigger project ratings.
Property managers can easily keep renters in the loop of upgrades and projects taking place with a tenant portal. Even minor alterations that are upcoming can be communicated easily through notifications, keeping tenants in the know of anything that might effect them.
The RMI posted its second highest score for minor additions and alterations at 60 since the second quarter of 2015. Owner-occupied homes tabulated a 64 for the second consecutive quarter while rental properties pushed close to its most recent benchmark of 50 for the fourth time in five months.
The RMI is based on a quarterly survey of NAHB remodeler members that provides insight on current market conditions as well as future indicators for the owner-occupied and rental properties remodeling market.
Minor additions and alterations in rentals have steadily recovered from a significant fall at the end of 2016. The index has bounced back and forth from a 48 to 49 since the first quarter of 2017.
Overall, major additions and alternations in rental properties remained healthy at 48, despite a five-point drop from end of last year.
Robust economy, recovery from natural disasters fuel remodeling
NAHB Remodelers Chair Joanne Theunissen said in January after the RMI reach 60 for overall upgrades for only the second time since 2001 that the economy and rebuilding from natural disasters played a large role.
“A booming stock market and low unemployment continue to fuel consumers’ investment in their homes,” said Theunissen, a remodeler from Mt. Pleasant, Mich. “Natural disaster-related repairs also caused strong demand for maintenance and repair projects.”
Future market indicators are back peddling a little from last fall, but there’s relief in the backlog of remodeling jobs.
The backlog of work is shrinking and fewer short-term job commitments are being made, a sign that the construction market may be recovering from hurricanes that damaged Texas and Florida and other natural disasters.
After posting one of the biggest gains in recent years in the fourth quarter, the backlog of remodeling jobs plunged 14 percent in the first quarter of 2018. In the fourth quarter, the bottleneck rose from 60 points to 66, the highest it’s been in 17 years.
Last fall, when the backlog was at its highest at 66 in data released by NAHB going back to 2001, Chief Economist Robert Dietz said jobs may have been backing up because of higher construction costs and skilled labor shortages.
Meanwhile, overall demand for work over the next three months has dropped four points to 58, ending a two-quarter run of growth. The rental property sector suffered an 11 percent decline, compared to 7 percent in owner-occupied.
Joint Center says outlook positive for foreseeable future
But rental properties are calling for more bids, a trend that compares similarly to the owner-occupied market. Calls for estimates jumped two points to 48 for rental properties and one point to 62 for owner-occupied properties. Improvements to existing rental properties, specifically amenity upgrades, has the potential to encourage tenants to renew their lease. Excite them by communicating the status of renovations though your tenant portal.
Abbe Will, associate project director in the Remodeling futures Program at the Joint Center, said the remodeling industry will continue to move forward in the foreseeable future. The industry has come a long way since posting $267 billion in work in early 2015.
“While the overall outlook is positive, one area of concern is the slowing growth in sales of existing homes, since sales traditionally trigger significant renovation spending by both sellers and buyers,” Will said. “Even with this headwind, annual spending on residential improvements and repairs by homeowners is set to exceed $340 billion by early next year.”