It probably isn't startling news, but as Americans are cutting back on spending for non-essentials such as vacations and electronics, they are also spending a lot less on spiffing up or even maintaining their homes.
The National Association of Home Builders (NAHB) released its Remodeling Market Index (RMI) on Tuesday and it showed a significant decline in the current market conditions' indicator for the third quarter of 2008.
The measure of current market conditions declined to 33.5 from 41.8 in the second quarter while expectations of future remodeling work also declined to 27.7 from 38.0. Both of these are historic lows for the index which began in 2001.
The RMI is based on a quarterly survey of professional remodelers, whose answers to a series of questions are 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 calls for bids, amount of work contracted 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.
Like NAHB's monthly survey of new home sales, the RMI is based on a 100 point index. Any score over 50 indicates that the majority of respondents, in this case professional remodelers, view market conditions as improved or improving. The index has stayed below 50
since the last quarter of 2005, implying decreasing expenditures on remodeling since that time.
NAHB Remodelers Chairman Lonny Rutherford stated, "Remodelers reported another drop in major home improvements and expectations for future work have also declined."
National figures reflecting current activity for major additions and alterations which were at 43.18 in the second quarter shrank to 29.38 in the third, while minor additions and alterations dropped from 42.89 to 38.51. Maintenance and repair dropped to 30.92 from 39.06.
NAHB Chief Economist David Seiders said that "The remodeling market declines follow the pattern of the home building slow-down (but) to a lesser degree."
He said that the market is also tightening in part due to more home builders moving into remodeling work. "This creates a more competitive marketplace and a flattening out of calls for bids and appointments for proposals."
Current market expectations fell in three out of four regions. The South fell to 31.5 from 40.1 in the second quarter; the Midwest to 36.2 from 52.9; and the West declined to 36.1 from 42.4. However, the Northeast saw a slight increase in the index, from 32.8 to 32.9
All measures of future expectation (calls for bids, amount of work committed for next three months, backlog of remodeling jobs, and appointments for proposals) declined.
In the "special questions" section of the survey remodelers were asked about energy efficiency products and reported that customers' calls for work to improve home energy efficiency had increased to 26 percent from responses of 24 in the third quarter of 2006. Installation of low-energy windows remain the top customer request, but 50 percent of remodelers report installing water-saving faucets and fixtures (up from 36 percent) and 38 percent installed on-demand water heaters (up from 29 percent).