According to the National Association of Home Builders latest NAHB/Westlake Royal Remodeling Market Index (RMI) for the second quarter, the index posted a reading of 77, declining 10 points compared to the second quarter of 2021.
"Although most remodelers across the country are still positive about the market, a growing number are starting to experience symptoms of a slowdown," said NAHB Remodelers Chair Kurt Clason. "Some customers are showing a reluctance to go forward with projects due to the higher costs and delays associated with material shortages, as well as higher interest rates."
The NAHB/Westlake Royal RMI survey asks remodelers to rate five components of the remodeling market as "good," "fair" or "poor." Each question is measured on a scale from 0 to 100, where an index number above 50 indicates that a higher share views conditions as good than poor.
The Current Conditions Index is an average of three components: the current market for large remodeling projects, moderately-sized projects and small projects. The Future Indicators Index is an average of two components: the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects. The overall RMI is calculated by averaging the Current Conditions Index and the Future Indicators Index. Any number over 50 indicates that more remodelers view remodeling market conditions as good than poor.
The Current Conditions Index averaged 83, dropping eight points compared to the second quarter of 2021. All three components declined as well: the component measuring large remodeling projects ($50,000 or more) fell 11 points to 79, the component measuring moderately-sized remodeling projects (at least $20,000 but less than $50,000) dropped seven points to 84 and the component measuring small remodeling projects (under $20,000) declined by six points to 86.
The Future Indicators Index dropped 11 points to 72 compared to the second quarter of 2021. The component measuring the current rate at which leads and inquiries are coming in fell 13 points to 68 and the component measuring the backlog of remodeling jobs decreased by 10 points to 76.
"The RMI remains firmly in positive territory above 50 but has declined on a year-over-year basis, particularly the RMI component for large remodeling projects over $50,000," said NAHB Chief Economist Robert Dietz. "This suggests some weakness in the market and is consistent with NAHB's projection that residential remodeling spending, like new residential construction, will be down in 2022. However, NAHB's forecast continues to have remodeling outperforming single-family construction in 2022 and 2023 in terms of growth rates."
The NAHB/Westlake Royal RMI was redesigned in 2020 to ease respondent burden and improve its ability to interpret and track industry trends. As a result, readings cannot be compared quarter to quarter until enough data are collected to seasonally adjust the series. To track quarterly trends, the redesigned RMI survey asks remodelers to compare market conditions to three months earlier, using a "better," "about the same," "worse" scale. Twenty-one percent of remodelers said the market had gotten worse in the second quarter of 2022, compared to only 11 percent who said it had gotten better. This is the first time the "worse" has exceeded the "better" percentage since the first quarter of 2020 (the quarter of the onset of the pandemic).