Remodeling continues to surge
The National Association of Home Builders’ Remodeling Market Index posted a reading of 60 in the fourth quarter of 2017, up three points from the previous quarter and only the second time since 2001 the reading has reached 60, the NAHB reported.
“At a high of 60, the RMI is consistent with the strong growth in home improvement spending in 2017,” NAHB chief economist Robert Dietz said. “However, the surge in the backlog of remodeling jobs likely reflects supply-side challenges remodelers are facing in the form of skilled labor shortages and rising material prices.”
The RMI has been at or above 50 for 19 consecutive quarters, which indicates that more remodelers report market activity is higher compared to the prior quarter than report it is lower. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity.
“A booming stock market and low unemployment continue to fuel consumers’ investment in their homes,” said NAHB remodelers chair Joanne Theunissen, a remodeler from Mt. Pleasant, Mich. “Natural disaster-related repairs also caused strong demand for maintenance and repair projects.”
Current market conditions increased four points from the third quarter of 2017 to 60. Among its three major components, major additions and alterations jumped seven points to 60, minor additions and alterations increased three points to 59, and the home maintenance and repair component rose three points to 61, the NAHB said.
The future market indicators index rose one point from the previous quarter to 59. Calls for bids decreased two points to 56, amount of work committed for the next three months rose two points to 58, the backlog of remodeling jobs gained a significant six points to 66, and appointments for proposals fell two points to 57.
Builder confidence drops slightly
Builder confidence in the market for newly built single-family homes dropped two points to a level of 72 in January on the National Association of Home Builders/Wells Fargo Housing Market Index, the NAHB reported.
Confidence had hit an 18-year high in December 2017.
“Builders are confident that changes to the tax code will promote the small business sector and boost broader economic growth,” said NAHB chairman Randy Noel, a custom home builder from LaPlace, La. “Our members are excited about the year ahead, even as they continue to face building material price increases and shortages of labor and lots.”
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number more than 50 indicates that more builders view conditions as good than poor.
The three HMI components registered relatively minor losses in January. The index gauging current sales conditions dropped one point to 79, the component charting sales expectations in the next six months fell a single point to 78, and the index measuring buyer traffic fell four points to 54.
“The HMI gauge of future sales expectations has remained in the 70s, a sign that housing demand should continue to grow in 2018,” said NAHB chief economist Robert Dietz. “As the overall economy strengthens, owner-occupied household formation increases and the supply of existing home inventory tightens, we can expect the single-family housing market to make further gains this year.”
Looking at the three-month moving averages for regional HMI scores, the West rose two points to 81, the South increased one point to 73, the Midwest inched up a single point to 70 and the Northeast climbed five points to 59.