Remodeling Industry Strong in Q1 – Mixed Growth on the Horizon
Contractors, we’re off to a great start in 2017. According to the National Association of Home Builders’ Remodeling Market Index, the RMI (market activity) is at a 58, an increase of 5 points from Q4 2016, the highest reading since 2015. Perhaps the largest increase is in small remodeling projects, a market that has jumped 7 points. Major additions, alterations, and maintenance also saw a nice increase from the previous quarter. To put this into perspective, an RMI above 50 indicates that more remodelers feel that market activity is pretty solid.
NAHB chairman Dan Bawden noted that “A milder than usual winter has led to increased remodeling activity and a positive outlook for spring.” He also said, “Remodelers are seeing stronger market conditions with customers more willing to spend money on both small and large projects.” Overall, it appears there is a general optimism surrounding the industry. We’re coming off a record year in 2016, where we saw remodeling spending hit $361 billion. Annual growth is projected at 2% through 2025. Even better yet, though, remodeler profit margins are spiking. In 2011, the average profit was 3%, in 2015 that rose to 5.3%.
Despite all this positive news, not all are optimistic. Some reports suggest that remodeling work could slow this year. According to a report from Harvard University’s Joint Center for Housing Studies, remodeling spending could decrease from 7.3% in Q1 2017 to 6.1% in Q1 2018. However, this is still high above long-term growth trend of 5%. Point is, things are pretty solid right now. Even if we see some decline, it will be above the average. Although we do see talk of decline, the RMI has not shown a slow in housing demand in 4 years. As home prices continue to rise, homeowners look to renovate, restore and remodel to increase resale value. Millennials and baby boomers will take up most of the remodeling market in the coming years. Millennials will buy old homes and restore them to the modern era, adding in a sustainable aspect. Boomers will remodel to age in place. A shocking statistic predicts boomers will take up half of the market by 2025, a 31% increase from 2005.
Thanks for reading!