Two of the latest reports measuring spending and sentiment for home improvement activities indicate that homeowners are spending less these days on remodeling. The National Association of Home Builders (NAHB) released its NAHB/Westlake Royal Remodeling Market Index (RMI) for the third quarter, showing a decline of three points compared to the previous quarter. Another indicator measuring spending on improvements and repairs shows a steady decline in activity. According to the projections of Harvard University’s Joint Center for Housing Studies, homeowners have consistently decreased spending in these areas over three consecutive quarters.

Source: Joint Center for Housing Studies of Harvard University

“While there is still demand for remodeling, we are seeing some customers pull back a bit, especially for larger projects, due to higher prices and increased interest rates,” says NAHB remodelers chair Alan Archuleta.

NAHB’s Current Conditions Index averaged 72, falling five points compared to the second quarter. The component measuring large remodeling projects, including those valued at $50,000 or more, decreased five points, landing at 67, while the measure for moderate remodeling projects (those valued between $20,000 and $50,000) fell four points to 73. The same is true regarding the index for small-sized remodeling projects (under $20,000), which decreased by five points to 76.

With those changes, the Current Conditions Index, an average of the current market for large, moderately sized and small projects, also fell by five points, to 72.

The Current Conditions Index is an average of the current market for large, moderately sized and small projects. Source: NAHB

For forward-looking predictions, NAHB’s Future Indicators Index combines the current rate at which remodelers say leads and inquiries are coming in and the current backlog of projects. The Future Indicators Index currently registers at 57—three points below the prior quarter.

NAHB’s Future Indicators Index combines the current rate at which remodelers say leads and inquiries are coming in and the current backlog of projects. Source: NAHB

NAHB’s overall RMI is calculated by averaging the Current Conditions Index and the Future Indicators Index. The 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.

RMI
The Remodeling Market Index (RMI) is measured on a scale of 0 to 100. The survey asks remodelers to rate five aspects of the remodeling market as “good,” “fair” or “poor.” An index number of 50 indicates a higher share of remodelers view conditions as good rather than poor.
Source: NAHB Economics Group: Remodeling Market Index quarterly survey of remodelers

While changes show decline across the board for the current quarter, an RMI of 65 indicates that more remodelers view conditions as good than poor.

With that in mind, “Although the RMI is down slightly, it remains in positive territory,” says NAHB chief economist Robert Dietz. “The remodeling market, less impacted by interest rates, continues to outperform new construction, increasing from 31% of total residential construction in 2002 to 43% in second-quarter 2023.”

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