Remodeling Sentiment Dipped in Q4 but Remains in Optimistic Territory

According to the National Association of Home Builders/Westlake Royal Remodeling Index (RMI) for 2022Q4, released today (1-19-23), remodelers market sentiment declined 17 points year-over-year, from a reading of 83 in 2021Q4 to a reading of 66 in 2022Q4.

The RMI is based on a survey that asks remodelers to rate the various aspects of residential remodeling market as “good,” “fair,” or “poor.” Responses from each question are then converted into an index that ranges on a scale for 0 to 100, where an index number above 50 indicates that a higher share view conditions as good rather than poor.

While the RMI remains in positive territory, remodelers are noticing a disconnect from consumers due to elevated costs of labor and certain building materials. In 2022Q4, the Current Conditions component index was 75, falling 14 points when compared to 2021Q4. The subcomponent that measures large remodeling projects (in excess of $50,000) decreased 14 points to a reading of 71. Moderate size remodeling ($20,000 – $49,999) declined 13 points to a reading of 77. Finally, small remodeling projects (under $20,000) dropped 14 points to a reading of 77.

The NAHB is forecasting that the remodeling sector will experience a slowing in nominal growth in 2023, but they believe that activity should pick up towards the latter half of the year. This is based on the Fed’s signaling that they plan to slow the pace of interest rates hikes.