Dive Brief:
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Remodeling activity kicked off 2017 on a high note with the National Association of Home Builders' Remodeling Market Index rising five points in the first quarter to a reading of 58. Future market indicators also increased, with growth in calls for bids, committed work and project backlogs.
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Among project types, major additions and alterations, smaller remodeling projects and home maintenance and repair all saw increases from the previous quarter.
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Other reports suggest that renovation and repair work could slow somewhat this year. The Leading Indicator of Remodeling Activity from Harvard University's Joint Center for Housing Studies forecasts spending growth to decrease from 7.3% in Q1 2017 to 6.1% by Q1 2018 while holding above its long-term growth trend of 5%.
Dive Insight:
The NAHB’s findings align with other recent reports showing that home-improvement professionals are optimistic about activity ahead. Remodeling spending reached a record high of $361 billion in 2016, with 2% annual growth expected through 2025. Meanwhile, remodeler profit margins are widening — from 3% in 2011 to 5.3% in 2015 — according to a separate NAHB report.
Even with a slowdown in growth projected, the RMI has not shown a contraction in demand in roughly four years. More still, as home prices continue to rise, owners are opting for updates that add value to their existing properties instead of trading up, giving way to more opportunities for home-improvement specialists.
Baby boomers and millennials are expected to drive renovation spending in the coming years. As many boomers remodel for ease of accessibility, analysts predict the demographic could account for more than half of spending in the sector by 2025. That’s up from 31% of remodeling spending in 2005. Millennials will likely drive remodeling spending by purchasing homes in need of renovation and concentrating those projects on energy-efficient features, healthy materials and smart-home systems.
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