Remodeling Index Posts Moderate Gains, But Forecast Firms
WASHINGTON, D.C. (August 15, 2014) Metrostudy, a Hanley Wood company, announced today the release of its Second Quarter 2014 Residential Remodeling Index (RRI) detailing activity in the remodeling and replacement industry.
The index gained 4.3% in the second quarter, year-over-year, which follows a 6.5% year-over-year increase in the first quarter. Despite the moderation in growth rate, the RRI has posted ten consecutive quarterly improvements and eight consecutive year-over-year increases since the market bottomed at the end of 2011.
The slower growth pace of the home improvement sector came as American households adjusted to the sticker shock of higher costs of living, particularly in bumps to food and gasoline prices. The seasonally adjusted second quarter national composite of the RRI registered a score of 95.5, which was a 0.4% improvement over the revised first quarter result of 95.1. The 0.4% increase follows first quarter’s 0.6% gain.
“Second quarter’s reading on national remodeling activity was just slightly weaker than what was initially forecast in the first quarter’s release – missing the actual number by 0.2%. Consumer confidence paused in April and May as inflationary pressures crept in, and Americans tempered remodeling efforts against some cooling in home price appreciation,” remarked Brad Hunter, Chief Economist of Metrostudy. “Still, a better-than-expected report on second quarter GDP, rebounds in the Consumer Confidence Index in June and July, and six consecutive months of job growth in excess of 200,000 allows us to remain bullish on our remodeling forecast. A firming in housing fundamentals – faster job growth, more ‘non-distress’ home sales, and higher household formations – is expected to drive remodeling and replacement growth for many quarters ahead. According to our latest forecast, the remodeling market will reach full recovery nationally by third quarter 2015.”
“The long-term outlook for growth remodeling is positive as well,” Hunter added. “Once mortgage rates start to rise, many people who locked in today’s low mortgage rates will be reluctant to move and lose that low financing rate, choosing instead to improve the home they already own.”
Metrostudy produces the RRI to provide the industry visibility into local market remodeling activity, forecasted future activity, and potential demand. According to the company’s second quarter report, 371 out of 381 Metropolitan Statistical Areas should see year-over-year growth in remodeling and replacement projects in 2014, with average growth of 4%.
About the Residential Remodeling Index
The RRI is a quarterly measure of the level of remodeling activity in 381 metropolitan statistical areas (MSA) in the U.S., with the national composite reflecting the national level of activity. “Activity” includes home improvement and replacement projects, but does not include maintenance or projects of less than $1,000. The seasonally adjusted index shows the relative level of activity in the geography specified (MSA or national composite) compared to 2007 (the baseline year). A number above 100 indicates a level of remodeling activity higher than the level of activity at the beginning of 2007, which was the peak of remodeling activity in the prior decade.
The index is produced through a statistical model that leverages detailed data on remodeling activity, including household level remodeling permits, and consumer-reported remodeling and replacement projects. Quarterly historical results for the national composite and for each of the 381 Metropolitan Statistical Areas in the U.S. are available back to 2004. In addition, Metrostudy also produces annual estimates of project counts and expenditures as well as forecasts of the quarterly RRI and annual projects and expenditures.
About Metrostudy
Metrostudy, a Hanley Wood company, is the largest provider of comprehensive research and insight for the real estate industry. Builders, developers, banks, manufacturers, retailers and many other industries all rely on Metrostudy’s data and analytics to support strategic business decisions at the local, regional and national market level.
About Hanley Wood
Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.
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