The NAHB/Westlake Royal Remodeling Market Index (RMI) for the first quarter of 2023 posted a reading of 70, edging up 1 point from the fourth quarter of 2022.
While remodelers are generally more optimistic than their single-family builder counterparts, some are noting negative effects within the market including continued material shortages and higher interest rates. Current overall RMI reading of 70 is consistent with NAHB forecasts for the remodeling sector which will experience growth in 2023, but at a slower pace than in 2022.
The RMI is based on a survey that asks remodelers to rate various aspects of the residential remodeling market “good,” “fair” or “poor.” Responses from each question are converted to an index that lies on a scale from 0 to 100, where an index number above 50 indicates that a higher share view conditions as good than poor.
The RMI is an average of two major component indices: 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 (under $20,000).
In the first quarter of 2023, the Current Conditions component index was 75, dropping 2 points from the fourth quarter of 2022. Quarter-over-Quarter, the two subcomponents decreased: large remodeling projects fell 3 points to 71 and small projects declined 2 points to 77; while moderately-sized remodeling projects remained unchanged at 78. Higher interest rates are having an effect on larger projects, with most of the homeowners who undertake large projects paying cash rather than financing them.
The Future Indicators Index is an average of two subcomponents: the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects. In the first quarter 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 two points; the current rate at which leads and inquiries was at 59 compared to 57 in the previous quarter and the backlog of remodeling jobs was at 69 compared to 67.
The NAHB/Westlake Royal RMI was redesigned in 2020 to ease respondent burden and improve its ability to interpret and track industry trends. For the first time since the redesign, NAHB has collected enough data to allow for seasonal adjustments of the results. This means that readers are now able to compare readings quarter to quarter which was not previously possible.
For the full set of RMI tables and a complete history for each RMI component, please visit NAHB’s RMI web page.