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Conditions mixed for remodeling industry

The National Association of the Remodeling Industry released its fourth-quarter “Remodeling Business Pulse” data of current and future remodeling business conditions, which continue to point to growth. Currently 67 percent of remodelers nationwide are seeing growth compared to only 15 percent who are reporting declines.

The current conditions rating showed a slight decline to 6.31 from 6.41 in September; ratings above 5 indicate growth. This easing comes after two quarters of growth. While the ratings of current conditions all remain positive, marginal decreases in three of the four sub-components reflect lower growth rates. The exception was for ‘sales value of jobs sold,’ which had a small increase.

“There has been long term improvement in sales value, which indicates that larger projects are making a comeback,” says Tom O’Grady, chairman of NARI’s Strategic Planning & Research Committee and president of O’Grady Builders, based in Drexel Hill, Pa. “Consumers are feeling that the economy will be good for the foreseeable future.”

While postponed projects remain the top reason at 70 percent for growth, moving into the No. 2 position is consumer’s feelings of more certainty about the future. This driver spiked to 63 percent in the current survey, up from 43 percent recorded in September. Economic growth was seen as a driver by 62 percent, up 5 percent from last quarter, while improving home prices remained unchanged at 50 percent.

While all ratings of current conditions remain positive, most of the sub-components were softer than September. The below ratings are from 1 to 9, in which 1 is much worse than a year ago and 9 is much better; 5 is about the same as last year:

  • Number of inquiries was 6.11, down from 6.51.
  • Requests for bids fell to 6.04, down from 6.41.
  • Conversion of bids was 5.84, down from 6.01.
  • Sales value of jobs was almost constant at 6.30, just above the 6.27 rate in September.

“This is indicative of the slow, steady recovery of the remodeling industry,” said O’Grady. “The majority of remodelers are seeing growth, and are confident that the market is improving, which is in line with market indicators.”

Unlike the current business rating, the outlook for business three months from now had a statistically significant increase in December, to 6.32 from September’s 6.07, reversing the downward trend of the past two quarters.  Increased business is expected by 73 percent of remodelers while only 10 percent are anticipating declines.

Comparing business conditions across different regions of the country, it is interesting to note that the West has the strongest ratings for all of the sub-measures of current conditions. The Northeast is lower on all measures except ‘Conversion to bids to jobs’ where it dips significantly lower versus all but the Midwest. The outlook for the future is directionally strongest in the South.

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