Big-ticket residential remodeling activity nationwide rose 1.3% in the second quarter from the first , Metrostudy said Aug. 21 as it released its latest Residential Remodeling Index (RRI). The second quarter of 2018 was the RRI's 25th consecutive quarter of year-over-year gains since 2011.
The RRI as of the second quarter of 2018 stood at 114.4, its highest ever reading. The number means the economic conditions known to influence remodeling activity are 14.4% better than the old peak in early 2007, just before the Great Recession. As of the second quarter of 2018, the RRI was 5.2% above the year-earlier level. Metrostudy, a sister company of ProSales, projects the number of remodeling projects worth $1,000 or more will rise to 12.6 million, a 5% increase from last year. The continued strong growth in the RRI is fueled by the long economic expansion and a still-strong housing market, according to Metrostudy.
“The U.S. economy is in the midst of its longest streak of consecutive monthly job growth in history, and, the median existing home price has recorded seventy-six consecutive months of year-over-year gains,” said Mark Boud, chief economist at Metrostudy. “With record setting levels in employment growth and home equity, it is little wonder that Americans are investing in home upgrades. We expect the remodeling industry to close strong in 2018, with more moderate, but still-steady growth in 2019.”
The index is based on a statistical model that takes into account such data as household level remodeling permits, employment statistics, and a market's economic health. It then uses that model to predict the number and dollar volume of home improvement and replacement projects worth at least $1,000.
Metrostudy predicts the inflation-adjusted value of big-ticket remodeling projects in 2018 will rise 6.7% to $194.2 billion. Metrostudy projects that the index should rise 2.7% in 2019 and is projected to experience positive growth through 2021. According to Metrostudy, all 381 of the nation’s Metropolitan Statistical Areas will see growth in 2018 project volume and the average rate of growth will be about 4.3%.
“While the good times roll, there are still some headwinds for the industry. Slowing home sales amid tight inventory is limiting remodeling growth potential, as is the acute shortage of construction labor,” Boud said. “And more recently, even before the steel and aluminum tariffs were initiated, we saw a sharp rise in costs for residential construction materials. Rising costs and effects of tariffs will need to be watched carefully over the next several quarters.”
