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Remodelers across the country reported confidence in the market as they close their books on 2021 and look ahead to the new year. Though supply chain delays, inflation, and labor shortages continue to drive up the time and cost of completing projects, many remodelers saw unprecedented demand last year.
The remarkable strength of the remodeling sector reflects the unanticipated path taken over the last two years, from initial doubt in early 2020, to remodeling’s boom, spurred by Americans’ time at home and cushion in their bank accounts.
By the Numbers
The most recent data from the NAHB/Royal Building Products Remodeling Index (RMI), which measures current market and future indicators, showed that remodelers across the board are feeling positive. The overall RMI in Q3 of 2021 was 87, as compared to 82 in Q2 of 2021 and up from a low of 48 in Q1 of 2020. Each question, and the overall index, is measured on a scale from 0 to 100, where an index number above 50 indicates that more respondents view conditions as good than poor. All the RMI indices that measure current conditions (large, moderate, and small-sized projects) ranked in the high 80s or low 90s. Of the two indices that measure attitudes about future conditions—sentiment regarding the rate of new leads registered 83, up five points from the third quarter of 2020, while the backlog of remodeling jobs climbed eight points year-over-year to 85.
The coming year brings cautious optimism. Strong demand is balanced by challenges that are slowing residential construction with an outsized impact on remodeling. Material shortages and related price jumps have been the biggest drag on the remodeling sector.
Lumber prices cooled slightly over the past few months but have begun rising again. And the U.S. Commerce Department’s recently announced tariff increase on Canadian lumber could further affect prices for remodelers and their customers.
Supply Chain and Labor Problems Continue
It’s not just lumber products: Supply chain and logistics slowdowns wreak havoc across the board. Additionally, inflation rates make goods stuck somewhere in transit even more expensive by the time they reach their final destination. For example, the average price of major appliances is up almost 27% since January 2020. The cost of completing a project for a homeowner is on the rise.
And supply chain disruptions are not the only challenge. Labor shortages have made remodeling projects more time-consuming and expensive. That trend is backed up by employment data: The number of open construction jobs increased to 410,000 in October, the highest measure in the history of the data series (going back to late 2000). With the labor market tightening, remodelers are likely looking at some uncertainty regarding who will work on future projects, even as new leads continue to pour in.
2022 is certain to bring a lot of change in the industry. However, another RMI index should offer some solace: A growing majority of remodelers report that conditions are “about the same” as they were three months ago. In this business environment, saying conditions remain stable is a big win.
NAHB remains fully engaged on these issues that have such a large impact on remodeler businesses. And indicators suggest another strong year for this sector. That’s good news for the country because a robust remodeling industry can provide an important boost to the broader economy as the nation seeks a return to normal.