Tuesday, August 22, 2006
Home remodeling slows in second quarter
Renter-occupied units take top priority, builders group finds
Real estate remodeling activity slowed in the second quarter of 2006, as the current market conditions index decreased from 48.1 to 45.6 and future expectations fell from 48.9 to 43.5, according to the National Association of Home Builders' Remodeling Market Index (RMI).
The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view market conditions as improving.
"We expected lower sentiment as the overall housing market slows, and the second-quarter numbers certainly reflect that," said Remodelors Council Chairman Vince Butler. "However, the remodeling market should perform relatively well as the overall housing market slows."
The RMI component for owner-occupied units dropped from 53.8 to 49 in the second quarter, while the component for renter-occupied units increased from 36.7 to 39 during the same period. In the future expectations index, the component for owner-occupied units sank from 53.2 to 47.2 and the renter-occupied component decreased from 30.4 to 28.8. Rental-property remodeling accounts for a third of all remodeling expenditures.
"Remodeling is less volatile than new-home construction partly because nearly half of all expenditures represent non-discretionary maintenance and repair projects," said NAHB Chief Economist Dave Seiders. "The average age of the housing stock is 32 years and rising -- well past the time when major home systems need replacement. Supported by more than $11 trillion in homeowner equity, the fundamentals of the remodeling market will remain strong for the foreseeable future."
The RMI "special questions" section asked about aging-in-place home modification trends. Of remodeling companies surveyed, 60 percent modify homes for aging-in-place needs. Asked to identify the age of clients, 76 percent indicated that they have clients aged 55-64, 67 percent had clients aged 65 and older, and 43 percent had clients aged 45-54. Additionally, 75 percent of remodelers reported increasing requests for aging-in-place features.
Asked to identify the main reasons that customers requested aging-in-place modifications, 75 percent of respondents said their clients were planning ahead for future needs. Other reasons included living with older parents (53 percent), acute age-related disabilities (46 percent), and acute non age-related disabilities (23 percent). The majority of aging-in-place work is determined by the client (66 percent) as opposed to being suggested by the contractor (34 percent). Only 4 percent of remodelers found potential clients not receptive to suggested aging-in-place modifications.
The RMI is based on a quarterly survey of professional remodelers, whose answers to a series of questions were assigned numerical values to calculate two separate indexes. The first index gauges current market conditions and is based on remodelers' reports of major and minor additions and alterations, plus maintenance work and repairs, on both owner- and renter-occupied dwellings. The second index gauges expectations for the near future and is based on remodelers' reports of their calls for bids, amount of work committed for the next three months, job backlogs and appointments for proposals. A variety of "special questions" are also asked at the end of the survey to help pinpoint market trends.
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