Earlier speculation that the red-hot remodeling industry might begin to cool down in 2018 appears to have been premature.
Despite challenges of labor shortages and rising materials costs, market conditions are generally favorable for remodelers of all stripes. A number of factors are coalescing that likely will not only continue to drive positive growth this year, but may also outpace that of recent years.
Demand for remodeling services remained strong in the fourth quarter of last year. The National Association of Home Builders announced that its Remodeling Market Index for the last three months of 2017 gained 3 points over the previous quarter, reaching a score of 60 for only the second time in the Index’s history.
Current market conditions showed improvement, with remodelers reporting increased activity for both major and minor additions and alterations, as well as for home maintenance and repair. In addition, reported backlogs of remodeling jobs rose 6 points, and the amount of work committed for the first quarter of this year was up 2 points. The Index has now stayed in positive territory (50 or above) for 19 consecutive quarters.
Looking ahead, the Joint Center for Housing Studies at Harvard University forecasts a “robust” year for the industry, with “growth accelerating as the year progresses.” Its most recent Leading Indicator of Remodeling Activity (LIRA) projects annual spending on renovation, remodeling, repairs and home maintenance will increase by 7.5 percent above that of 2017.
“Despite continuing challenges of low for-sale housing inventories and contractor labor availability, 2018 could post the strongest gains for home remodeling in more than a decade,” stated Abbe Will, research associate in the Remodeling Futures Program at the Joint Center, noting that annual growth rates have not exceeded 6.8 percent since 2007.
Several factors are combining to create highly favorable conditions for the industry. Low unemployment and a strengthening economy have increased consumer confidence and, thus, consumer spending. Housing prices have continued to rise in many areas of the country, providing homeowners with additional equity to fund remodeling projects. Many of those homeowners have no plans to move, preferring to renovate and upgrade, as well as do needed repairs, to their current home instead of relocating to another.
Among those staying put is a large number of older homeowners, who historically would be looking to sell when demand is high. That trend has reversed itself at present.
“Importantly, almost three out of five (57 percent) of our potential buyer universe chooses to remodel today rather than to buy and move into a new home community,” according to Char Kurihara, corporate vice president of branding and sales for Dan Ryan Builders, speaking to Builder magazine about today’s 55-plus home market.
Yet another factor raising industry expectations is the ongoing recovery from last fall’s spate of hurricanes, floods and fires. While large numbers of homes were destroyed completely, still others will require substantial repairs and renovations to make them safe and livable again. Total costs are likely run into the tens of billions of dollars. Labor and materials shortages could hamper rebuilding efforts in some areas, adding to current backlogs.
Bitter weather across much of the United States in January may have caused a dip in activity as the year got underway. Going forward, remodelers can expect to be in demand throughout the year.
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