CHICAGO—In three years of registering data, remodelers have yet to express a sentiment rating below 50 on a scale of one to 100. That streak continued in the third quarter of 2023 as remodelers gave conditions a 53 rating, which is technically still in growth mode and remains at ‘normal’ levels. The number is, however, the lowest reading since the U.S. Remodeler Index was initiated in the fall of 2020, when the economy was in the throes of the COVID-19 pandemic.
The 53-sentiment rating is down from a 56 reading the previous quarter, and down from a 57 in the fourth quarter of 2022, when many economists were predicting a recession this year. So far, consumers have continued to spend despite higher inflation and much higher mortgage interest rates.
When viewed by remodeling segment, the sharpest pull back in sentiment was among home improvement and replacement firms. Their sentiment was a 51 in the third quarter, down from a 61 reading for the quarter ending in June. Full-service remodeling firms, those that handle all types of jobs big and small, remained unchanged at 52, while design-build firms, those that specialize in large projects, fell to a 55 reading, down from 61 in June.
Analysis from John Burns Research and Consulting, which produces the index in collaboration with Qualified Remodeler magazine cited four key takeaways in its third quarter report on the numbers.
- The average remodeling customer is pulling back on new projects for now. Homeowners are tightening budgets, saving costs wherever they can, and delaying or deferring needed improvements. A smaller set of wealthy, aging, long-term homeowners (many with no mortgage payments) are moving ahead with big-ticket remodeling projects.
- Remodeling customers are choosing lower-cost options. Customers start new projects, reducing project scopes, splitting up large projects over time, and swapping in cheaper products—all to save on up-front costs.
- The supply chain is back to normal, but labor is still tight. Lead times for building products have improved over the past year, with many remodeling saying delays are no longer an issue. Remodelers still find it hard to find enough workers to finish jobs on time.
- Remodelers expect a slight rebound in 2024 revenue growth despite the weak volume of new project inquiries. Remodelers expect slightly higher revenue growth in 2024 than in 2023, which may be overly optimistic. With new project inquiries slowing, remodeling project activity is likely to decline ahead.
Sentiment for future activity during the next three months was varied. Home improvement and replacement firms rated the period ahead with a bearish 44 reading, while design build firms remained relatively bullish delivering a reading of 60 for the near term. Full-service firms held exactly where they are for current conditions with a 52 reading for the near term.
Despite the chillier sentiment among remodelers, all three segments are expected to grow their revenues in 2023, the report said, with bigger gains coming in 2024.
- Full service remodelers expect to grow by .05 percent in 2023, 2.4 percent for 2024
- Design build remodelers expect to grow by 2.5 percent in 2023, 4.3 percent for 2024
- Home improvement Pros expect to grow by 1.0 percent in 2023, 2.5 percent for 2024
You can download a copy of the full report below.