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Remodeling Holds Steady Despite Housing Slump
Remodeling activity remained steady in the fourth quarter of 2006, according to the NAHB Remodeling Market Index (RMI), with the component measuring industry perceptions of current market conditions rising slightly from 47.8 to 48.2 on a seasonally adjusted basis and future expectations climbing to 46.0 from 45.4.
“Remodeling retained strength across most of the country compared to late last year,” said NAHB Remodelers Chairman Mike Nagel, CGR, CAPS, a remodeler from Chicago, Ill. “Certainly regional economies and housing markets play an important role, but overall we see maintenance of high levels of remodeling activity and solid future prospects.”
The RMI component for the rental market registered a strong increase in activity in the forth quarter, with current conditions increasing from 38.8 to 44.1 and future expectations rising from 37.1 to 42.4.
By comparison, current remodeling market conditions for owner-occupied units dropped from 51.4 to 49.7, while future expectations for this sector edged up from 45.0 to 45.6.
“Though the substantial reductions in home sales and new housing production have had an impact on the remodeling market to some degree, we feel that remodeling of both owner-occupied and rental housing will remain strong compared to other areas of the industry,” said NAHB Chief Economist Dave Seiders. “With record levels of home-owner equity and the constant need to upgrade the older housing stock, the remodeling outlook appears quite good for years to come.”
Regionally, the South reported the most growth, with current conditions increasing to 52.8 and future expectations moving up to 51.1. The current conditions in the West grew to 52.4 but future expectations fell to 51.3. In the Northeast, current conditions moved down to 45.7 while future expectations increased to 50.1. Only the Midwest showed declines in both indexes, with current conditions decreasing to 44.4 and future expectations dropping to 35.7.
In a special section of the survey on which the index is based, remodelers were asked about subcontracting. Approximately one-third of a remodeling company’s work by dollar volume was subcontracted out, according to the responses. The median value of a general contractor’s subcontracted work in 2006 was $289,500 (with an average of $572,323), against a median dollar volume of $848,214 for general contractors last year. Only 17% of the remodelers who were surveyed reported acting as a subcontractor for other firms, and among all remodelers, work as a subcontractor accounted for only 2% of their dollar receipts.
For more information, e-mail Jim Lapides at NAHB, or call him at 800-368-5242 x8451.
 How Does Your Remodeling Business Measure Up?
The “Remodelers’ Cost of Doing Business Study,” available through BuilderBooks.com, is a comprehensive assessment of the growth and viability of the remodeling industry that enables remodelers to see how their business stacks up against the competition.
Conducted by the NAHB Economics Group and the NAHB Remodelers, the study provides a statistically accurate analysis of the remodeling industry in terms of size, profitability, time in the business, business organization and staffing.
The study allows remodelers to compare key business statistics, such as gross and net profit margins, against results from the most successful remodelers.
To order the “Remodelers’ Cost of Doing Business Study” online, click here, or call 800-223-2665.
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