WASHINGTON, D.C. (February 8, 2013) — The level of remodeling and replacement project activity nationally continued to show improvements in the fourth quarter of 2012, according to the latest release of the Residential Remodeling Index (RRI) by Hanley Wood. The seasonally adjusted fourth quarter national composite of the RRI registered a score of 84.08, which was a 0.3 percent improvement over the revised third quarter result of 83.82.
The increase quarter-to-quarter was the fourth consecutive increase after the industry experienced declines for the five straight quarters ending in 2011, The industry experienced the declines in activity as energy-related tax credits expired at the end of 2010 and both housing and the general economy wilted in 2011. As housing fundamentals began turning the corner in 2012, remodeling and replacement activity began to increase and is forecasted by Hanley Wood to improve at a better pace over the next several years.
Estimated remodeling and replacement projects in 2012 came in at just under 10.2 million, an increase of 1 percent over 2011 and reversed the prior year-over-year decline of 3 percent from the 10.4 million estimated projects completed in 2010. The market peaked in 2007 at 12.2 million large, pro-worthy projects.
“The fourth quarter of 2012 came in slightly weaker than expected,” remarked Jonathan Smoke, Chief Economist of Hanley Wood. “In October, we had forecasted we would see improvement of 0.4 percent on a seasonally adjusted basis in the fourth quarter, but the initial fourth quarter RRI measured a 0.3 percent improvement. “This was a temporary lull brought on by dampening consumer confidence at the end of the year, no doubt tied to tax policy and economic uncertainty. We are now expecting the first quarter of 2013 to likewise improve slightly at a lesser rate than the previous three quarters, but then we see improving growth throughout the rest of 2013 and into 2014.”
Smoke added, “We are expecting 2013 to be stronger than 2012 with our current official fourth quarter of 2013 forecast of 86.41, which would represent a 2.8 percent increase over the fourth quarter of 2012. For comparison, the fourth quarter of 2012 measured a 2.4 percent improvement over the fourth quarter of 2011. We should pick up steam each quarter for the next several quarters as home prices rise, home sales recover, consumer confidence improves, and the volume of investor activity in the resale market begins to peak and abate.”
Hanley Wood began producing the RRI over three years ago in order to measure local market remodeling activity, forecast future activity, and identify potential demand for remodelers and building product manufacturers. According to the company’s fourth quarter report, there are 301 out of 366 Metropolitan Statistical Areas with forecasted growth in remodeling project activity for 2013 with the average growth in activity in these recovering markets of 3 percent.
Hanley Wood ranks the best markets for remodeling based on market health, level of activity, extent of recovery, and potential demand. The current Top Ten best markets for remodeling are Buffalo, Houston, Dallas, San Antonio, Pittsburgh, Austin, Rochester (NY), Oklahoma City, Charlotte, and Denver. The largest remodeling markets based on forecasted projects in 2013 are New York, Los Angeles, Chicago, Washington, Philadelphia, Dallas, Houston, Boston, Atlanta, and Miami.
About the Residential Remodeling Index
The RRI is a quarterly measure of the level of remodeling activity in 366 metropolitan statistical areas (MSA) in the U.S., with the national composite reflecting the national level of activity. “Activity” includes home improvement and replacement projects, but does not include maintenance or projects of less than $500. The seasonally adjusted index shows the relative level of activity in the geography specified (MSA or national composite) compared to 2007 (the baseline year). A number above 100 indicates a level of remodeling activity higher than the level of activity at the beginning of 2007, which was the peak of remodeling activity in the prior decade.
The index is produced through a statistical model that leverages detailed data on remodeling activity, including household level remodeling permits, and consumer-reported remodeling and replacement projects. Quarterly historical results for the national composite and for each of the 366 Metropolitan Statistical Areas in the U.S. are available back to 2004. In addition, Hanley Wood also produces annual estimates of project counts and expenditures as well as forecasts of the quarterly RRI and annual projects and expenditures.
About Hanley Wood
Hanley Wood, LLC