CHICAGO—Remodelers and home improvement professionals nationwide remain bullish about residential construction activity according to the latest U.S. Remodeler Index, a gauge of sentiment and remodeling activity conducted quarterly by Qualified Remodeler and John Burns Real Estate Consulting.
The most recent USRI release asked residential remodelers about the strength of their businesses today and into the future. For the first quarter of 2022, the aggregate reading was 67.7 on a scale where any reading over 50 is positive. Readings at 70 or above are considered strongly positive.
A full-report from the John Burns team found four key takeaways.
- Big project remodeling demand expands, driving Pro activity. 58% of remodelers say project sizes increased in 1Q22. Large-scale projects are driving the professional remodeling market, and projects continue getting bigger despite rapidly rising costs. Remodelers are focusing on these larger projects, where clients are less budget conscious and willing to accept higher prices to get their project underway as soon as possible.
- Material costs drive inflation remodelers; labor costs not far behind. Remodelers report double-digit inflation in every product category, ranging from 12% to 18%. Remodelers have been successful at raising prices to offset inflation, and many have shifted product and material price uncertainty onto clients, for instance through escalation clauses. Labor inflation is also widespread. Clients have reportedly taken the price increases in stride, although some remodelers have noted an uptick in postponements or pushback on price increases just recently.
- On product/material lead times: “green shoots” starting to emerge, although pessimism is still widespread. Remodelers (and their clients) have come to accept extremely long lead times for products. Now, there are early signs of improvement: remodelers are getting much better at project planning and substituting products and vendors based on availability; project timelines are starting to stabilize; and some product lead times have compressed.
- 7-8% remodeling revenue growth expected in 2022, as economic and supply uncertainty tempers robust backlogs. Remodelers’ full-year revenue expectations are slightly lower than last year at this time, a result of elevated demand mixed with difficult comps and project delays. However, remodelers are generally optimistic given the robust backlog of demand. With constraints on both materials and labor, however, more of the 7-8% growth expected this year is likely to come from pricing and product mix than volume. Recent economic uncertainty has also tempered the outlook.
Direct questions about the report to Eric Finnigan, Director with John Burns at firstname.lastname@example.org. To learn more about Qualified Remodeler or other media brands at SOLA Group Inc., contact Paul Degrandis at email@example.com.