Remodeling index hits five-year high

The National Association of Home Builders' (NAHB) Remodeling Market Index (RMI) reported a 46.6% jump in activity in the fourth quarter of 2011, compared with the third quarter, marking its highest level in five years. 

In the fourth quarter, the RMI component measuring current market conditions rose to 48.4 from 43.0 in the previous quarter. Future indicators of remodeling business were also positive, increasing to 44.8 from 40.4 in the third quarter.

An RMI below 50 indicates that more remodelers reported market activity is lower (compared with the prior quarter) than reported it is higher.

"As more consumers remain in their homes rather than move in this economy, remodelers benefited from a gradual increase in home improvement activity, taking us to a five-year high," said NAHB remodelers chairman Bob Peterson, a remodeler from Ft. Collins, Colo. "2011 ended on a strong note for the remodeling industry." 

All four regions of the country benefited from the gains between the third and fourth quarters of 2011. The RMI reported higher market activity in two important categories: major additions at 52.3 (from 45.2) and minor additions at 50.1 (from 45.7).

Two of the indices reported a level over 50: calls for bids at 50.7 (from 45.4) and appointments for proposals at 50.1 (from 43.3), while work committed for the next three months only rose to 31.5 (from 29.9).

"With several key components above 50, the latest RMI provides reason for guarded optimism going forward," said NAHB chief economist David Crowe. "The residential remodeling market has been improving gradually, mirroring the trend in other segments of the housing market. Stringent lending requirements and economic uncertainty continue to be a drag on demand, but we expect a modest growth in remodeling activity to continue throughout 2012."