By Jana
Ward
Professional remodeling switched into
lower gear at the end of 2002 as residential property owners put off
significant additions and improvements in response to weaker
economic conditions and seasonal factors, according to results of
the National Association of Home Builders’ Remodeling Market Index
(RMI), released in late January. Remodelers reported a fairly weak
amount of activity near the end of what was overall a very strong
year for home improvements.
Some of the decline was
undoubtedly due to owners’ decisions to delay property improvements
in light of economic jitters. However, it’s not unusual for fewer
remodeling jobs to be getting underway in the winter months and
during the holidays. What’s encouraging is that the vast majority of
remodelers surveyed for the RMI are expecting solid dollar volumes
and profit margins in 2003.
The RMI is based on a quarterly
survey of more than 600 professional remodelers, whose answers to a
series of questions are assigned numerical values in order to
calculate two separate indexes. The first index gauges current
market conditions and is based on remodelers’ reports of major and
minor additions and alterations, plus maintenance work and repairs,
on both owner- and renter-occupied dwellings. The second index
gauges expectations for the near future and is based on remodelers’
reports of their calls for bids, amount of work committed for the
next three months, job backlogs and appointments for proposals. A
variety of “special questions” are also asked at the end of the
survey to help pinpoint market perspectives.
Remodelers
reported the exact same level of maintenance and repair work on
homes and apartments in the final quarter of 2002 as they did at
year-end 2001. This indicates that there’s a baseline of activity
when it comes to essential work that owners commission to keep their
homes and apartments functioning properly even as they postpone the
more discretionary improvements and additions.
Though
remodelers in all four regions of the country saw less business in
the final quarter of 2002 than they did in the previous quarter,
remodelers in the South and West were slightly busier at the end of
2002 than at the end of 2001.
Results of the “special
questions” section of the RMI revealed that remodelers are not only
pleased with their total business activity for 2002, but that they
are expecting even better results in 2003. For example, asked about
the number of remodeling jobs completed by their company in 2002, 83
percent said that volume had either increased or stayed the same,
while only 27 percent said it had decreased. Moreover, fully 89
percent said they expected the dollar volume of their remodeling
jobs to either increase or stay the same in 2003 compared to 2002,
while 91 percent said they expected profit margins of their
remodeling businesses to increase or stay the same this year in
comparison to 2002.
The special questions section sought a
slightly longer-range view of market expectations than the RMI’s
future expectations index, which gauges remodelers’ confidence in
conditions approximately three months’ out.
The bottom
line is, remodelers aren’t expecting an instant rebound in
remodeling jobs this year, but are confident that activity will
ratchet back up during the spring home improvement season. Factors
such as rising home values, which give people more equity to borrow
against for home improvements, plus stellar financing conditions,
will continue to drive professional remodeling in
2003.
Jana Ward, of Clear Choice Flooring
and Design, is president of the Greater San Antonio Builders
Association Remodelors®
Council.
