Every quarter, the National Association of Home Builders (NAHB) is surveyed in regard to remodeling activity. A number of factors are measured, including current jobs, future contracts, and bid requests. The results are published in a report known as the RMI, or Remodeling Market Index. A score below 50 implies that those in the remodeling market are reporting a decline in projects. On July 23rd, the NAHB released the findings from the second quarter’s survey.
Although 2015 started off with a strong RMI of 60, it had dropped a bit to 57 in the first quarter. Now, it has bounced back to a reading of 59! What is also wonderful to note with this score is that it has remained above 50 for nine quarters in a row. To fully grasp what great news this is, just consider that in the fourth quarter of 2008, the RMI was a disheartening 22.
The four subcomponents that the RMI measures are: bid requests, the amount of work obligated for the next three months, the current backlog of jobs and appointments for proposals. To examine the scores regionally, the breakdown for Q2 is as follows:
- South – 61
- West – 61
- Northeast – 61
- Midwest – 57
The chair of the NAHB, Robert Criner reflected, “The confidence in the remodeling industry has been in positive territory for nine quarters in a row as the entire housing industry’s situation continues to improve. With an increase in existing home sales, remodelers received more signed contracts and calls for pricing.”
As for what the most popular type of home remodeling job has been, homeowners all over the country are choosing major additions as their most sought-after improvement. That choice rose from a score of 54 in Q1 to 57 in Q2. This definitely improved the confidence level of home builders and remodelers since the category of “current market conditions” gained 1 full point and rose to 59.
In looking ahead to the close of 2015 and beyond, the category of “future market conditions” was also positive, going up from 55 to 58. Its subheadings, “calls for bids” and “appointments for proposals” went up five or more points. Finally, in the area of how many homeowners out there have already committed to having remodeling work done within the next three months and beyond, has picked up five points.
As someone with his finger directly on the pulse of the nation’s home building industry, the NAHB’s chief economist, David Crowe expressed his faith that the rebound in remodeler confidence is directly tied to the strengthening real estate market, through both new construction and existing sales. Crowe also noted that “Gains in the RMI are tempered by ongoing labor shortages for work on remodeling projects.”
His thoughts have been echoed throughout the summer, especially in the South and the West. Diana Olick, of CNBC, recently covered this news story in her online blog, “Realty Check.” Olick reported that in spite of strong sales, the single-family home construction market hit a three-month low this past June. Word on the street is that the work is there, but the skilled labor is sorely lacking. Paul Emrath, another NAHB spokesperson, noted that “The 9-trade shortage is now substantially higher than it was at the peak of the 2004-2005 boom.” The term “9-trade” refers to the specific skills that are involved in home building such as framing, plumbing, wiring, concrete pouring and so on.
Construction crews are having a very difficult time keeping up with demand these days. The main issues that have contributed to this labor shortage are that many who were previously involved with home building had to change careers after the financial crisis of 2008.
Hmmm…sounds like anyone contemplating a new vocational path would do well to look into one of the 9 trades of home building!
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