Rising costs and interest rates impact remodeling market
Demand for remodeling, particularly for larger projects, declined in the third quarter, according to the latest National Association of Home Builders (NAHB) report.
“While there is still demand for remodeling, we are seeing some customers pull back a bit, especially for larger projects, due to higher prices and increased interest rates,” said NAHB Remodelers chair Alan Archuleta.
Despite the decline, the NAHB/Westlake Royal Remodeling Market Index (RMI) remains in a positive domain, indicating an overall optimistic sentiment among remodelers.
The RMI for the third quarter recorded a reading of 65, marking a three-point decline from the previous quarter. A reading above 50 on this 0-100 scale signifies a positive outlook.
NAHB chief economist Robert Dietz highlighted the resilience of the remodeling market, which continues to outshine new construction.
“The remodeling market, less impacted by interest rates, continues to outperform new construction, increasing from 31% of total residential construction in 2002 to 43% in the second quarter of 2023,” Dietz said.
The current conditions index, which averages the responses regarding large, moderately sized, and small remodeling projects, fell five points to 72. Each component witnessed a decline: large projects dipped five points to 67, moderate projects slid four points to 73, and small projects dropped five points to 76.
The future indicators index, assessing the rate of incoming leads and inquiries and the backlog of projects, also experienced a decline, falling three points to 57. Both of its components saw reductions, with leads and inquiries down three points to 56, and the backlog of jobs slipping two points to 59.
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