CHICAGO—Residential construction companies that focus on remodeling and repairs reported renewed optimism during the first quarter of 2023 according to latest U.S. Remodeler Index (USRI) from Qualified Remodeler and John Burns Research & Consulting. The index registered a 60.6 reading, which is considered strong. The USRI is a diffusion index. Any reading over 50 signals growth.
Significantly, the near-term outlook for remodeling rose to 65.8, up from 57.3 in the previous quarter. It was the largest quarterly increase in near-term sentiment since the survey was launched in 2020. The boost in optimism coincided with the arrival of spring, the peak season for remodeling activity.
“Remodelers entered 2023’s peak project season more optimistic, with the US Remodeler Index increasing for the first time in two years,” said Eric Finnigan, a vice president with John Burns. “The supply chain is much less of a drag, and most remodelers are still booked out for months. But be cautious about expecting a bounce: High interest rates, surging costs, and banking-system stress are working their way through the industry. We think a clearer slowdown will materialize the rest of the year.”
Key findings include:
- Revenue growth for 2023 is expected to be solid ranging from 3 percent to 5 percent. Home improvement pros and replacement contractors will grow 5 percent on average. Design-build firms expect 4 percent growth in 2023. And full-service remodelers expect 3 percent growth on average.
- The jump in near-term optimism can almost entirely be attributed to higher seasonal expectations. Higher-than-normal levels of project backlogs as well as a reduction in product lead times also factored into the rosy outlook.
- Signs of a slowdown have emerged. Higher interest rates and rising costs will have an impact. And remodelers reported fewer requests for project bids and a lower rate of conversion into paid projects.
The USRI captures responses from a broad range of remodeling companies in all parts of the country. Those include full-service and design-build companies that specialize in major discretionary projects like additions and upgrades to kitchens and baths, as well as specialty home improvement firms that offer moderately priced repairs and improvements, often at a high volume. QR