As consumers begin pulling back on spending, remodelers and home improvement pros show signs they’re girding for an environment of slower demand. That’s the result of the recently released U.S. Remodeler Index for the third quarter of 2022, which ticked lower to a 62 reading, down from 65.7 in the second quarter. Despite the pullback the most recent reading remains at a level of business sentiment that is considered ‘strong’.
The U.S. Remodeler Index is a diffusion index where a reading of 50 or above indicates growth. The 62 out of 100 reading for Q3 2022 indicates that the remodeling market expanded during the quarter. It was created in 2019 by John Burns Real Estate Consulting and Qualified Remodeler magazine and is a composite reading from three groups: home improvement pros, full-service remodeling contractors and design-build remodeling professionals.
During the quarter design-build firms offered the most positive reading (63.8) followed by home improvement pros (63.7) and full-service contractors (60.7). The index is also broken down by gauges of current activity, near-term outlook, and a remodeling demand meter that is expressed differently on a scale of 1 to 10 where 10 is the strongest possible reading. The 3Q USRI reading pegged current activity at 62.9, down from 65.3 previously. Near-term activity for the next three months fell to 60.9, down from 67.3 previously. And the remodeling demand fell to 6.1, down from 6.5 in Q2.
Analysts at Burns identified four key takeaways from the latest survey.
- A 4.9-month average backlog among respondents continues to support remodeling and spending levels. Fifty-six percent of remodelers report at least four months of projects ‘in-progress’ or ‘planned’ with very low or rare project cancellations.
- Pricing power is shifting away from remodelers and building product companies as remodeling clients have less room to flex in their budgets. Fifty-five percent of remodelers say customers are downgrading to stay within a budget.
- Supply chain issues continue to improve. More than two-thirds of remodelers now see some improvement on product lead times.
- Revenue growth for remodelers will range between 5 percent and 8 percent in 2022 with a slowdown coming in 2023.
“”The USRI confirms the post-pandemic remodeling boom has passed,” said Eric Finnigan, vice president of research and demographics at John Burns. “With home values now declining and interest rates soaring, look out for a more significant slowdown in residential remodeling next year.” QR