More home remodelers are reporting an increase in market activity, as the National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) posted a reading of 58 in the third quarter of 2018. This continues the trend of the RMI consistently posting readings above 50 and remains stable from the previous quarter.
A reading of 50 or higher on the RMI indicates that more remodelers report market activity is higher compared to the previous quarter than report it is lower. The overall RMI reading averages current remodeling activity as well as future indicators.
“Remodelers across the country are seeing home owner demand remain strong through the midpoint of the year,” said NAHB Remodelers Chair Joanne Theunissen, CGP, CGR, a remodeler from Mt. Pleasant, Mich. “Both positive home price growth – albeit at a slightly slower rate – and good consumer confidence are supporting the steady remodeling market.”
Current Remodeling Market Conditions
According to the data from NAHB, the RMI reading for current market conditions rose one point from the previous quarter to 58. Among the three major components within the index, major additions and alterations rose one point to 56, minor additions and alterations fell one point to 57 and the home maintenance and repair component gained one point, reaching a level of 60.
Future Conditions
Future remodeling market indicators remained steady, posting a level of 59 (the same as the previous quarter). Calls for bids rose two points to 57, amount of work committed for the next three months increased three points to 59, the backlog of remodeling jobs fell four points to 62 and appointments for proposals dropped two points to 59.
“The stability of the RMI reflects offsetting trends in the remodeling market,” said NAHB Chief Economist Robert Dietz. “A sound economy with low unemployment and easing lumber prices are being counterbalanced by rising interest rates and the ongoing labor shortage.”
Summary in Plain English
The data collected from the latest RMI shows us that more homeowners are interested in remodeling their properties, good news for contractors and laborers in the industry. What’s even more noteworthy is the trend has held steady, with confidence in the home remodeling industry gaining ground consecutively, quarter to quarter.
The downside to higher remodeling demand, is that it may indicate that fewer homeowners are interested in selling their homes. This could further tighten real estate inventory, making it difficult for buyers to find homes that fit their needs and budget. Smaller, starter homes are in particularly high demand right now, but with more people staying in their homes longer, it may be a challenge for younger or first time buyers to enter the market.
In fact, with so few homes on the market, many first time buyers are questioning whether the so-called starter home really makes sense. Some are finding it more sensible to skip the starter home, save up a little more money, and go for the forever home at the start. However, “buying up” on your first home purchase can have its drawbacks. Obviously, there’s the higher cost. It could take longer for a first time buyer to save up enough money for a down payment.
Wondering if buying up on your first home purchase makes sense for your situation? Check out our other blog post that discusses this topic and the pros and cons in detail.
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