Analysts Give Mixed Signals on Remodeling Outlook

Posted on 12 November 2015 by cradmin

Chart courtesy of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University

Chart courtesy of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University – Click To Enlarge

According to the firsthand accounts we’ve been hearing at CountertopResource.com since our last report, the state of the remodeling industry is incredibly positive. Both contractors and related subcontractors, including countertop fabricators and installers, are enjoying a steady increase in business and in profits. However, a few reports show that the boom may be slowing, and business owners may be facing new difficulties going into 2016.

NARI Says Growth Slowing

In early October, the National Association of the Remodeling Industry (NARI) released its industry analysis, Remodeling Business Pulse (RBP) for the third quarter of 2015. The RBP tracks current remodeling conditions and outlook, and it is professionally organized with data and research by the marketing firm Consumer Specialists.

The report revolves around a final rating that is supposed to be a conglomerate measure of the current conditions for remodelers. The rating is on a scale of one to nine, and a rating of five or higher indicates growth. The RBP rating for the third quarter 2015 was 6.03, which is a sure sign of fair growth. However, this is a decline from the second quarter rating of 6.48.

Breaking the report down into its individual components, declines were measured nearly across the board:

  • Inquiries declined 4.6 percent.
  • Requests for bids declined 4.0 percent.
  • Value of jobs declined by 4.6 percent.
  • Bid conversion remained unchanged.

The analysis provided by NARI states that the leading factor driving growth was postponed projects followed by an improvement in home prices.

“Our businesses are becoming stronger, and that is good, but not as fast as it once was. We are adjusting to slow sustainable growth and are less optimistic, more realistic about what the future will bring,” said David Merrick of the NARI Strategic Planning & Research Committee. “Our customers are being careful about budgeting and taking on bigger projects so leads may be down a little, but the leads we are getting are more focused and on target and budget oriented.”

The future outlook in the RBP showed a picture similar to the analysis of current conditions. The rating for the outlook dropped from 6.07 to 5.79. Fifty-three percent of respondents in the survey stated they see growth in the future while 15 percent they are predicting a decline in business.

Houzz Renovation Barometer Falls

Even though the Houzz Renovation Barometer for quarter three has declined from the previous quarter, the company states that confidence remains high among home renovators. The analysis is broken into six categories: architects, designers, general contractors (GCs) and remodelers, designers-builders, specialty builders-renovators and specialty landscapers.

According to the report, industry optimism by GCs & remodelers fell six points from 78 to 72 even though Houzz predicted only a one-point decline in the last Renovation Barometer. Specialty builders-renovators saw a drop of four points from 77 to 73, but Houzz predicted the category would rise two points to 79.

Even though these drops are quite significant, Houzz focused on the positive aspects of the report. The following stats reflect the year-to-year numbers:

  • New business inquiries increased from 63 to 74
  • Number of new projects increased from 66 to 74
  • Size of new projects increased from 60 to 69

All of these indicators of new business growth fell on a quarter-to-quarter basis, but this may be attributed to the annual winter slowdown.

LIRA Predicts Rise in Remodeling Spending

In October, the Leading Indicator of Remodeling Activity (LIRA) was published by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. LIRA was developed to estimate national spending on home improvements for the current and three subsequent quarters.

According to the third-quarter report, home-improvement spending will fall from $149.4 billion in the third quarter to $148.3 billion in the fourth and $146.9 billion in the first quarter of 2016. However, by the second quarter of 2016, spending is expected to rise to $154.5 billion, which is an increase of 6.8 percent.




 





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