Headwinds threaten a strong home remodeling market

Despite rising inflation, rising interest rates, ongoing supply chain issues, and material and labor shortages, home remodeling remains resilient.

That National Association of Home Builders/Westlake Royal Remodeling Market Index (RMI) reported a reading of 86 in the first quarter of 2022, the same as a year ago. NAHB sees this as a sign of home renovators’ confidence in their market for projects of all sizes.

“An overall RMI of 86 indicates positive mood among rebuilders and is consistent with the NAHB forecast of moderate growth in the rebuild market for 2022,” NAHB Chief Economist Robert Dietz said in a statement. “Nevertheless, rising interest rates and high material costs are a considerable headwind for the renovation industry and the housing industry as a whole.”

The survey of NAHB/Royal Building Products 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, with an index number above 50 indicating a higher proportion consider the conditions to be good or bad. These components are then broken down into Current health indexwhich looks at the current market for large remodeling projects, medium-sized projects and small projects, and the Index of future indicators, which looks at the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects. The overall RMI is an average of the Current Conditions Index and the Future Indicators Index.

In the first quarter, the Current Conditions Index was 89, the same as a year ago. The component measuring large remodeling projects ($50,000 or more) rose four points to 89, while the components measuring medium-sized remodeling projects ($20,000 or more but less than $50,000) and small remodeling projects (under $20,000) both declined slightly to 89 and 90, respectively

The Future Indicators Index fell two points year-on-year to 82 points in the first quarter. The component that measures the backlog of conversion orders rose two points to 84, while the component that measures the current rate at which leads and inquiries are coming in fell six points to 80.

“Business remains strong for most remodelers entering 2022,” NAHB remodeling chairman Kurt Clason said in a statement. “However, some are beginning to report that customers are reluctant to move forward with projects due to delays and higher costs caused by supply chain issues.” Compare market conditions to market conditions three months ago using a ‘better’, ‘about the same’ and ‘worse’ scale. In the first quarter, 72% of survey respondents said the remodeling market was “about the same” as it was three months ago.

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