A good indication that the remodeling market is heading into a recovery, the NAHB Remodeling Market Index (RMI) for this year’s first quarter rose to 46.5, up from 41.5 in the fourth quarter of 2010 and its highest level since the fourth quarter of 2006.

On a scale of 0 to 100, a rating below 50 means that more remodelers review the market unfavorably rather than favorably, although the latest results show responses moving close to crossing that threshold.

The overall RMI combines ratings of current remodeling activity with indicators of future activity, such as calls for bids.

Current market conditions for the first quarter of 2011 rose to 46.1 from 43.3 in the previous quarter.

Future market indicators climbed to 46.8 from 39.7 in the previous quarter.

"Remodelers report a jump in activity so far this year and have been receiving more calls for work and appointments," said NAHB Remodelers Chairman Bob Peterson, CGR, CAPS, CGP, a remodeler from Ft. Collins, Colo.

"However, many home owners are still slow to commit to remodeling because they feel uncertain about the economic recovery and the difficulty in obtaining loans."

Regionally, the RMI rose from 38.8 to 46.1 in the Northeast, from 45.8 to 46.1 in the South and from 39.7 to 46.1 in the West.

Only the Midwest experienced a decline — from 54.3 to 47.1.

All current remodeling market indicators increased in this year’s first quarter over the final quarter of 2010:

• Major additions rose to 50.3, up from 48.6.
• Minor additions increased from 43.9 to 48.0.
• Maintenance and repair climbed from 37.0 to 39.5.

Future market indicators also improved across the board:

• Calls for bids rose from 47.2 to 53.1.
• Appointments for proposals were at 52.4, up from 43.1.
• The backlog of remodeling jobs climbed from 42.6 to 49.7.
• The amount of work committed for the next three months rose to 32.1, up from 25.9.

Added to the survey on which the RMI results are based, respondents were asked why prospective customers are refraining from remodeling their homes.

Among the results:

• Customers think it is hard to get financing — 90%.
• Customers have lost equity in their homes — 81%.
• Customers are uncertain about their future economic situation — 74%.
• There is reluctance to invest in the home when it is uncertain that the home will hold its value — 67%.
• Negative media stories are making customers more cautious — 62%.
• Inaccurate appraisals are making financing more difficult — 54%.

"Home remodeling continues to slowly increase, and continued growth through the year is expected," said NAHB Chief Economist David Crowe.

"The fact that some indicators are breaking 50 means remodelers are seeing improving activity in their markets,” he said.

“While credit scarcity and economic uncertainty continue to weigh down remodeling, signs of increasing consumer interest are promising."

For more information about remodeling, visit www.nahb.org/remodel.

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