In the second quarter of 2020, The NAHB Remodeling Market Index (RMI) posted a reading of 73, which indicates more remodelers view conditions as good than poor (Table 1). This is the second quarter with a new RMI, redesigned to ease respondent burden and improve its ability to interpret and track industry trends.

See Table 1 for results here.

The RMI survey asks remodelers to rate five components of the remodeling market as “good,” “fair” or “poor.” Each question is measured on a scale from 0 to 100, where an index number above 50 indicates a higher share view conditions as good than poor.

The Current Conditions Index is an average of three components: the current market for large remodeling projects, moderately-sized projects, and small projects, while the Future Indicator Index is an average of two components: the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects. The overall RMI is calculated by averaging the Current Conditions Index and the Future Indicator Index.

In the second quarter, all components and subcomponents of the RMI were well above 50. The Current Conditions Index averaged 77, with large remodeling projects ($50,000 or more) yielding a reading of 70, moderately-sized remodeling projects (at least $20,000 but less than $50,000) at 78 and small remodeling projects (under $20,000) with a reading of 83. The Future Indicators Index averaged 70, with the rate at which leads and inquiries are coming in at 72 and the backlog of remodeling jobs at 67.

In an effort to track quarterly trends, the redesigned RMI survey also asks remodelers to compare market conditions to three months earlier, using a ‘better,’ ‘about the same,’ ‘worse’ scale. This index posted a reading of 66, indicating that market conditions have improved substantially since the first quarter.

The strong RMI reading in the second quarter reflects business picking up as homeowners remodel with a focus on staying home for work and other activities, amid the pandemic. It is also important to note that remodelers face ongoing supply-side challenges, such as rising material prices and the lack of skilled labor.

For the full RMI tables, please visit www.nahb.org/rmi. For more information about remodeling, visit www.nahb.org/remodel.

In a strong signal that the housing market is ready to lead a post-COVID economic recovery, builder confidence in the market for newly-built single-family homes jumped 14 points to 72 in July, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI now stands at the solid pre-pandemic reading in March before the outbreak affected much of the nation.

Builders are seeing strong traffic and  interest in new construction as existing home inventory remains lean. Moreover, builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring.  Low interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.

While the housing market is clearly rebounding, challenges exist. Lumber prices are at two-year highs and builders are reporting rising costs for other building materials while lot and skilled labor availability issues persist.

Nonetheless, the important story of the changing geography of housing demand is benefiting new construction.  New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead. Flight to the suburbs is real.

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All the HMI indices posted gains in July. The HMI index gauging current sales conditions jumped 16 points to 79, the component measuring sales expectations in the next six months rose seven points to 75 and the measure charting traffic of prospective buyers posted a 15-point gain to 58.

Looking at the monthly average regional HMI scores, the Northeast surged 22 point to 70, the Midwest jumped 18 points to 68, the South increased 10 points to 73 and the West increased 14 points to 80.

The HMI tables can be found at nahb.org/hmi.

Real gross domestic product (GDP) decreased in all 50 states and the District of Columbia, in the first quarter of 2020 compared to the last quarter of 2019, as a result of the widespread shutdowns across the country due to COVID-19. The U.S. Bureau of Economic Analysis reported the real GDP growth rates, measured on a seasonally adjusted annual rate basis, ranged from -1.3% in Nebraska to -8.2% in New York and Nevada.

Nationwide, real GDP growth decreased to 5.0% in the first quarter of 2020, after an increase of 2.1% in the previous quarter. Accommodation and food services; finance and insurance; healthcare and social assistance; and arts, entertainment, and recreation were the leading contributors to the decline in real GDP in the first quarter of 2020.

Regionally, real GDP growth rates, ranged from -6.6% in Mideast to -2.8% in Southwest in the first quarter of 2020 compared to the last quarter of 2019.

According to the industry statistics, 17 of 22 industry groups contributed to the first quarter decline in real GDP. Of the five industry groups that recorded increases in the first quarter real GDP, agriculture, forestry, fishing, and hunting was the largest contributor, increasing 15.5% while construction increased 0.8%.

Real value added (a measure of an industry’s contribution to GDP) for arts, entertainment, and recreation decreased 34.7% in the first quarter, reflecting cancellations in performing arts and spectator sports. Accommodation and food services industry group decreased 26.8%, reflecting “stay-at-home” orders and closing of in-dining restaurants and bars. Accommodation and food services was the leading contributor to the decrease in Nevada, which tied for the largest GDP decrease with New York. Finance and insurance industry group’s real value added decreased 9.0% and health care and social assistance industry group, real value added decreased 7.8% in the first quarter. Finance and insurance industry group was the leading contributor to the decrease in New York.