Remodeling and replacement projects continue to come in stronger than originally expected based on the latest release of the Residential Remodeling Index (RRI) by Metrostudy, a Hanley Wood company. The seasonally adjusted third quarter national composite of the RRI registered a score of 93.3, which was a 2 percent improvement over the upwardly revised second quarter result of 91.3.
The increase quarter-to-quarter was the seventh consecutive improvement after the industry experienced declines in 2011 and bottomed out after peaking in 2007. As housing fundamentals began turning the corner in 2012, remodeling and replacement began to increase, but 2013 is turning out to be the strongest year for remodeling and replacement activity since 2007 due to strong housing market fundamentals driving demand. Metrostudy is forecasting the market to continue to improve over the next several years and is now calling for a full recovery nationally within the next two years.
“Remodeling and replacement activity has kicked into high gear as a result of robust existing home sales, strong home price appreciation, and rebounding consumer confidence,” said Jonathan Smoke, Chief Economist of Hanley Wood. “An additional boost to activity is a declining share of professional investors purchasing homes to rent. Owner-occupiers invest more significantly in home improvements than investors trying to secure a renter.”
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 first quarter report, there are 364 out of 366 Metropolitan Statistical Areas with forecasted growth in project activity for 2013, and markets average growth of 9% in projects over 2012. Metrostudy ranks the best markets for remodeling based on market health, level of activity, extent of recovery, and potential demand. The current top ten best markets for remodeling are Buffalo, Houston, San Antonio, Dallas, Austin, Pittsburgh, Des Moines, Denver, Oklahoma City, and Indianapolis.
The largest remodeling markets based on forecasted projects in 2013 are New York, Los Angeles, Chicago, Dallas, Washington, Philadelphia, Houston, Boston, San Francisco, and Atlanta.
About the Residential Remodeling Index
The RRI is a quarterly measure of the level of remodeling activity in 366 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 $500. 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 366 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.