Remodeling Outlook Remains Positive Despite Expectations of Tight Housing Market, RRI Finds
Big-ticket remodeling activity nationwide increased 3.4% year over year (YOY) in the second quarter of 2019, Metrostudy announced in its release of the latest Residential Remodeling Index (RRI). The index climbed to a new high of 118.3 in the second quarter, a 0.7% increase from the first quarter RRI.
The RRI values means that economic conditions known to influence remodeling activity are 18.3% better than the old peak in early 2007, just before the Great Recession. The positive growth in the RRI marks the 29th consecutive quarter of YOY gains since remodeling activity bottomed in 2011.
While Metrostudy calls for continued gains over the next few years in the remodeling industry, growth is expected at slower rates. The RRI is expected to average YOY increases of 3.2% in 2019, 2.0% in 2020, and 2.4% in 2021. The projected gains in 2020 and 2021 are both lower than projections from the first quarter RRI. The moderate gains are expected to be related to lower housing turnover via the low levels of new home construction, according to Metrostudy.
“At current levels, the job market is generating more than sufficient demand to feed the housing and remodeling markets. Existing home sales in July posted their first year-over-year increase in seventeen months due to the recent drop in mortgage rates,” Mark Boud, chief economist at Metrostudy said. “While the uptick in sales is reassuring, supply decreased 1.6% year-over-year and remains tight, which means sustained increases in future sales will be a challenge.”
Boud said the continued trend of Americans staying put and upgrading their homes will likely buoy and fuel future remodeling growth. Boud noted that Metrostudy expects continued increases in remodeling activity in the short term, just at slower rates compared to the past few years.
The RRI is based on a statistical model that takes into account data such as household level remodeling permits and consumer-reported remodeling and replacement projects. It uses a model to predict the number and dollar volume of home improvement and replacement projects nationwide worth at least $1,000 in 381 metropolitan statistical areas and nationwide.
Metrostudy projects the number of remodeling projects worth $1,000 or more will rise to 12.9 million, a 3.2% increase YOY. Big-ticket flooring and exterior projects are are expected to have the biggest increases in 2019, while big-ticket pool, siding, and window projects will have the smallest YOY increases. The inflation-adjusted value of big-ticket remodeling projects in 2019 is predicted to increase 4.7% to $203.7 billion.
According to Metrostudy, all but one metro area—Bismark, N.D.—will see growth in 2019 and these markets will experience an average growth rate of 3.1%.