Remodelers’ sentiment in the market remained positive for the 12th consecutive quarter.
The NAHB/Westlake Royal Remodeling Market Index (RMI) posted a reading of 70 in the first quarter of 2023, up a point from the previous quarter.
The RMI has remained stronger over the last year than its companion index of the single-family market, the NAHB/Wells Fargo Housing Market Index (HMI).
Slowed Growth in Remodeler Market for 2023
Despite remodelers’ more optimistic view, many feel that continued material shortages and higher interest rates are a drag on the market. Still, the RMI’s first quarter reading of 70 is consistent with NAHB economists’ forecasts that the remodeling industry will continue to enjoy growth in 2023, but not at the extraordinary pace seen in 2022.
To produce the RMI, NAHB Economics asks remodelers to rate several aspects of the residential market. The responses are converted into an index, where any number above 50 indicates that a higher share of respondents views conditions as good than poor.
Current and Future Conditions
The average of two major component indices make up the RMI: the Current Conditions Index and the Future Indicators Index.
The Current Conditions Index is an average of three subcomponents: the current market for large remodeling projects ($50,000 or more), moderately-sized projects ($20,000 to $49,999), and small projects (less than $20,000).
In the first quarter of 2023, the Current Conditions index was 75, dropping 2 points from the fourth quarter of 2022. Quarter over quarter, two of the subcomponents decreased: large remodeling projects fell 3 points and small projects declined 2 points; while moderately-sized projects remained unchanged. Higher interest rates are reportedly affecting larger projects.
The Future Indicators Index is an average of two subcomponents: the current rate at which leads are coming in and the current backlog of remodeling projects.
In Q1 of 2023, the Future Indicators Index was 64, which is 2 points higher than the fourth quarter of 2022. Quarter over quarter, both subcomponents increased by 2 points.