The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) posted a reading of 79 in the fourth quarter of 2020.
While the reading marks a three-point drop from a level of 82 in the third quarter, the NAHB said that the latest reading indicates remodelers’ confidence in their markets for projects of all sizes despite the ongoing negative impacts of the coronavirus pandemic.
“The remodeling market was consistently strong throughout 2020, as home owners had more time on their hands to improve their homes and add space and efficiency,” said NAHB Remodelers Chair Tom Ashley, Jr., a remodeler from Denham Springs, La. “However, activity slowed a bit at the end of the year as a result of the rising Covid-19 cases and an increase in economic insecurity.”
The RMI is based on a survey asking remodelers to rate five subcomponents of the remodeling market as “good,” “fair” or “poor.” Each question is measured on a scale from 0 to 100, where an index number above 50 indicates that a higher share view conditions as good than poor.
The Current Conditions Index is an average of three of these subcomponents: the current market for large remodeling projects, moderately-sized projects and small projects. The Future Indicators Index is an average of the other two subcomponents: the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects. The overall RMI is calculated by averaging the Current Conditions Index and the Future Indicator Index. Any number over 50 indicates that more remodelers view remodeling market conditions as good than poor.
In the fourth quarter, all components and subcomponents of the RMI were 71 or above. The Current Conditions Index averaged 85, with large remodeling projects ($50,000 or more) yielding a reading of 78, moderately-sized remodeling projects (at least $20,000 but less than $50,000) at 88 and small remodeling projects (under $20,000) at 89.
The NABH said that the readings indicate remodeling activity is strong across projects of all sizes.
Meanwhile, the Future Indicators Index averaged to 72, with the rate at which leads and inquiries are coming in at 71 and the backlog of remodeling jobs at 73.
The fourth quarter RMI reading signals robust growth for remodelers going into 2021.
The NAHB forecast predicts an acceleration in economic growth in the second half of 2021 as vaccination rates rise, further supporting remodeling activity.
“The fourth quarter RMI reading of 79 still signals ongoing growth for remodelers into 2021,” said NAHB Chief Economist Robert Dietz. “NAHB’s economic forecast predicts GDP growth accelerating as we enter the second half of 2021, as vaccination rates rise and the labor market continues to improve.”
The RMI was redesigned in 2020 to ease respondent burden and improve its ability to interpret and track industry trends. As a result, readings cannot be compared quarter to quarter until enough data are collected to seasonally adjust the series, the NAHB said.
To track quarterly trends, the redesigned RMI survey asks remodelers to compare market conditions to three months earlier, using a ‘better,’ ‘about the same,’ ‘worse’ scale. In the fourth quarter, 68 percent indicated conditions were the same as in the third quarter, 21 percent said ‘better’ and 11 percent ‘worse.’