Residential Remodeling Sets Healthy Pace in Second Quarter
Professional remodeling activity kept up a brisk pace in the second quarter of 2004, according to the latest Remodeling Market Index.  The second quarter results fall in line with the pace set a year ago, edging down slightly from the exceptional movement at the beginning of the year.

“Despite the dip from last quarter, many remodelers are still busy and backlogged,” said NAHB Remodelors Council Chairman Douglas Sutton, Sr., CGR, CAPS, a remodeler in Springfield, IL. “A year-to-year comparison shows we are set to match last year’s very strong activity — we don’t expect anything less.”

In a year-to-year comparison — the most accurate indicator as the RMI is not seasonally adjusted — both indexes showed activity in line with the second quarter in 2003. The current market conditions index stands at 53.5, compared to 2003’s 53.6. The future expectations index moved one point, from 54.8 in 2003 to 55.8 this year. The Northeastern, Southern and Western parts of the country all posted modest gains from 2003, with the Northeast posting the highest growth in both current and future expectations, rising from 52.1 to 58.3 and 55.6 to 61.4 respectively. The Midwest was the only region to show a minor slowdown, falling from 54.6 to 52.1 in current activity and 55.5 to 50.1 in future expectations.

“With the ongoing favorable interest rates and steady activity in all regions across the board, we expect the market to stay strong,” said NAHB Chief Economist David Seiders. “The RMI is still above 50 which signals that the market remains healthy. And despite a drop from the first quarter, the industry continues posting higher activity than in previous years.”

The market remained steady in terms of minor and major additions and alterations, with virtually no change from the second quarter of 2003. The RMI’s maintenance and repairs component saw a slight decline, from 55.45 to 53.71.

Where the Money Goes

For the first time, the RMI “special questions” section surveyed participants about where remodeling companies spend the majority of their total revenue.

Remodelers responding to the survey reported that, for maintenance and repair work, about one third of their revenue goes to direct labor (labor hired by the company), one fourth goes to materials purchased by company and 15% goes to subcontractors, which includes labor and material. The remaining one fourth of revenues breaks down by the following: 6% goes to sales and marketing and other costs, and 19% is overhead and profit.

For addition and alterations about one fourth of the revenue goes to labor, 28% to materials and 24% to subcontractors. Of the remaining 26%, 5% of the additions and alterations is in sales and marketing and other costs and 21% is in overhead and profit.

About the RMI: The RMI is based on a quarterly survey of professional remodelers whose answers to a series of questions were assigned numerical values to calculate two separate indexes. The first index gauges current market conditions and is based on remodelers’ reports of major and minor additions and alterations, plus maintenance work and repairs, on both owner- and renter-occupied dwellings. The second index gauges expectations for the near future and is based on remodelers’ reports of their calls for bids, amount of work committed for the next three months, job backlogs and appointments for proposals. A variety of “special questions” are also asked at the end of the survey to help pinpoint market trends.

If you are a remodeler and would like to participate in the RMI, send your name, company, address, telephone, fax and e-mail to Melanie Hinton. [return to top]