Remodeling Market Index Shows Slowdown

Market conditions for remodeling held steady during the first two quarters of 2001, according to the Remodeling Market Index (RMI), a brand-new economic index released on July 25 by the NAHB Economics Group and Public Affairs.

Although the national index held near a 55 rating for both the first and second quarters, the Northeast, South and West all saw drops in activity. The Northeast took the biggest hit, with the rating falling from 63.2 to 58.1. The Midwest, however, saw an increase from 53.3 to 55.6.

While any number above 50 indicates that remodelers view conditions as better than the previous quarter, numbers in the 50s and low 60s indicate that they only see the market as above average, not good, explains Bryan Patchan, director of communications for the Remodelors Council. "Remodeling is starting to show signs of a gradual drop-off," says Patchan. The study attributes the slowdown to the overall economic slowdown and the tough job market.

Ratings for future expectations declined from 66.4 to 62 in the Northeast and from 59.2 to 54.4 in the West. Remodelers in the Midwest and South were more hopeful, with ratings rising from 54.2 to 58.1 and from 55.4 to 56.7, respectively. Overall, future expectations held near 58. Modeled after the NAHB's Housing Market Index, the RMI will be released on a quarterly basis for the nation and each of the four census regions.

Methodology
Developed by surveying 1,500 remodelers from across the country, the RMI determines the current market conditions by analyzing remodelers' responses about market demand for major jobs ($25,000 or more), minor jobs (less than $25,000) and maintenance and repairs, as compared with three months earlier. The future expectations index looks at the number of calls for bids that remodelers have received, as well as the amount of work to which they've committed for the next three months, the current number of jobs, and the number of proposals compared with three months earlier.

Who's doing what in remodeling
Almost all -- 98 percent -- of the remodelers in the study do jobs for single-family, owner-occupied homes. This dropped off to 30 percent for single-family rentals and 26 percent for both multifamily rentals and owner-occupied homes. Eighty-five percent of remodelers did major additions and alterations, with 76 percent doing minor additions and alterations and 50 percent taking on maintenance and repair work. The median annual dollar volume of participating remodelers was $500,000.

A third of the RMI survey participants subcontract less then a quarter of their work, with almost another third subcontracting between 26 and 50 percent. Ten percent said they subcontracted 51 to 75 percent of their work, with another 16 percent subcontracting as much as three-quarters to all of their work. Only 12 percent reported that they did not use subs. Turning the tables, 24 percent of remodelers occasionally work as subs themselves.

Respondents indicated that the top three jobs nationwide were kitchens (62 percent), bathrooms (61 percent) and room additions (58 percent). The survey also showed that the most commonly used energy-saving materials nationwide were Low-E windows (76 percent), insulated exterior doors (71 percent), upgraded insulation (69 percent) and ceiling fans (67 percent).