by Reading indicates consumers still see value in projects that will beautify their homes now and in the future
WASHINGTON — Despite ongoing challenges with the housing market, remodeling appears to be in favor with consumers, according to the latest quarterly analysis by the National Association of Home Builders.
The NAHB reported earlier this month that its second-quarter Remodeling Market Index was 61, falling one point from the first quarter. It said this was still in positive territory as it has been in the low 60s the past year, and that any reading higher than 50 shows a higher number of respondents view conditions as good versus poor.
“Remodeler sentiment has been positive and stable over the past year,” said NAHB Remodelers Chair Elliott Pike, a remodeler from Homewood, Alabama. “The major headwinds that are preventing an even stronger remodeling market include rising costs, political and economic uncertainty, and difficulty obtaining financing with favorable interest rates for larger projects.”
Compare this with homebuilder sentiment, which for newly built single-family homes fell two points to 34 in July from an upwardly revised reading of 36 in June, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). It has remained below 40 for 15 consecutive months, the longest such stretch since the foreclosure crisis in 2011 and 2012.
Consumer confidence rose .6 points to 90.6 in June, largely in response to falling fuel prices, while the Expectations Index based on consumers’ short-term outlook for income, business and labor market conditions, rose 3 points to 74.4. However, the Present Situation Index based on consumers’ assessment of current business and labor market conditions, fell by 3 points to 116.4.
The builders’ confidence report in particular highlights some lingering concerns about the economy, including rising materials costs that impact new construction and the impact that has on housing affordability.
Add to that concerns voiced in the Consumer Confidence survey. While the results were bolstered by the lower fuel costs, many consumers are keeping a close eye on the labor market, noting that jobs are difficult to come by.
And with new construction and existing homes on the market that are perceived to be extremely expensive, many people simply want to stay put, whether the option is to move into a new home or purchase an existing home. Many also don’t want to trade up for a higher interest rate than what they are paying now, creating a wait-and-see approach that often has a crushing impact on furniture sales.
Thus, many consumers have a different attitude toward remodeling, seeing it as a way to spruce up their home in any number of ways, whether it involves new counters, a new screened-in porch, new landscaping, repainting or even adding a room onto the home.
NAHB Chief Economist Robert Dietz shared some thoughts on the recent remodeling reading, including the trend toward higher materials costs that impact overall project costs.
“Despite affordability concerns, rising homeowner equity and an aging housing stock are powering demand for residential remodeling,” he said. “This is keeping the remodeling market relatively strong despite certain impediments, like the rising cost of building materials. In the latest RMI survey, 74% of remodelers reported that their suppliers have increased prices of materials since March due to higher fuel costs, with the average increase in materials prices over that time being 6.7%.”
Yet these costs obviously pale in comparison with buying a new or existing home, which makes remodeling a cost-effective alternative to moving.
This is reflected in the Q2 results, which are seen in the Current Conditions Index, an average of three components that includes the current market for large remodeling projects, moderately sized projects and small projects.
+ The overall Current Conditions Index averaged 70, level with the previous quarter. It and three other components were above 50, which the NAHB said is in positive territory.
+ The component measuring large remodeling projects ($50,000 or more) dipped three points to 64.
+ The component measuring moderate remodeling projects (at least $20,000 but less than $50,000) rose four points to 73.
+ The component measuring small-sized remodeling projects (under $20,000) was level at 74.
Obviously, spending on furniture could be an afterthought depending on the size of the budgets involved. But this is where a design professional can help create rooms where furniture is the final brushstroke, whether it’s a dining set, sectional, or home office or home entertainment installation.
The message is that while home remodeling may represent a different type of spending on the home, it also represents an opportunity for retailers to reach those who are committed to beautifying their living spaces. New furniture can and should be a part of that investment now and in the future.
