U.S. Remodeler Index Expands for the Fourth Consecutive Quarter

Remodelers said they will grow 10 percent in 2021, on average.

authors QR Staff | December 14, 2021

Remodeler sentiment in the U.S. continued to expand in the third quarter of this year, according to the U.S. Remodeler Index. The index, which surveys residential remodelers in all segments nationwide, suggests that the market will have grown 10 percent for all of 2021.

The U.S. Remodeler Index is a diffusion index created by John Burns Real Estate Consulting and Qualified Remodeler magazine. In the third quarter of 2021 the overall reading was 71.4 on a scale where any reading over 50 is seen as a positive indicator for market health.

“I remember when forecasters were wondering if remodel spending was just ‘COVID pull forward’,” said Todd Tomalak, a principal with John Burns Real Estate Consulting in Irvine, California. “Based on this Q3 USRI read, the message is clear, professional remodeling, especially ‘big’ remodels, are gearing up for a strong 2022. Projects scopes are getting larger, and we are simultaneously seeing acceleration in project volume. In our view, the industry is likely under-estimating the strength of remodel spending to occur over the next few years, but these strong numbers are showing we should expect double digit growth in 2022. This supports our thinking that ‘big-project’ remodel spending will grow by over 40 percent cumulatively from start 2021 to 2024.”

The U.S. Remodeler Index for Q3 2021

Four Takeaways from John Burns

  1. Despite costs, project scopes continue to expand. Remodelers say inflationary pressure is highest on popular wood-based goods, such as cabinetry and decking. Despite the uptick in costs, consumers are still opting for large-scale home renovations. Over 60 percent of remodelers say average project size is larger in Q3 vs. Q2, noting most consumers are remodeling multiple areas of their house in the same project.
  2. Remodelers report timelines are slipping. Severe product delays are expected to persist into 2023. Over 70 percent of remodelers across all industry segments say projects are taking longer to complete vs. the same prior-year period, and 47 percent of remodelers indicate almost half of their current projects are behind schedule. Continuing product and labor shortages compound timeline issues and a growing number of remodelers expect these delays to persist into 2023.
  3. Product availability is a top concern. Brand is taking a backseat. Seventy-seven percent (77 percent) of remodelers say their top five sources of project delays stem from extended product lead times and lack of available labor. Remodelers and consumers are becoming more brand agnostic on products like appliances and cabinetry, as sheer availability begins to win out over brand preference.
  4. Remodelers are confident in double-digit average revenue growth of 10 percent for FY 2021. Although some consumers are electing to defer their projects into 2022, healthy project backlogs fuel remodeler confidence in full-year 2021 revenue growth of 10 percent, on average. Remodelers note that a decrease in product quality and escalating material costs are interfering with margins, but remaining supplier/vendor neutral and shifting focus to high-value projects has been favorable to their bottom line.

Q3 USRI readings by remodeling segment.

More remodelers report slipping in their timelines.

Key Takeaways by Segment

Full-Service Remodelers

  • Plus 8 percent project volume growth in Q3. Remodelers report a focus on high-value, multi-room remodels as consumers look to improve home functionality and remodelers themselves attempt to maintain margins.
  • Full-service remodelers say lead times are the largest growth hinderance and are less loyal to specific suppliers than they’ve been in the past. Despite these supply-chain pressures, full-service remodelers are confident in ending 2021 with an average of 10 percent full-year revenue growth.

Design-Build Firms

  • Plus 7 percent project volume growth in Q3. Design-build firms say escalating costs are beginning to “out-price” some of their clients, and 37 percent note their pipelines are starting to moderate. Despite some project tempering, 52 percent of remodelers say their pipelines are growing, extending well into 2022.
  • Design-build firms slightly softened their full-year 2021 average revenue growth expectations to 10 percent (reported at 11 percent in Q2). Remodelers say some consumers have deferred projects into 2022, but continuing demand fuels confidence in double-digit full-year revenue growth.

Home Improvement Pros

  • Plus 7 percent project volume growth in Q3 on outdoor living renovations and interior/exterior upgrades
  • 54 percent of home improvement pros report an increase in project volume compared to the same prior-year period as home-centric lifestyles become more common for consumers and drive demand for remodels. Some home improvement pros are focusing on smaller, quick-turnaround projects with fewer opportunities for product delays in effort to maintain project schedules. QR

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