Remodeling Market Index Edges Up

Future Market Indicators show that among RMI components, calls for bids were also very close to break-even, at 47.2. Calls for bids bottoming out is a first step in laying the groundwork for an improving market.

Big projects and calls for bids are now close to breaking even. NAHB's Remodeling Market Index (RMI) edged up from 40.8 to 41.5 in the fourth quarter of 2010. RMI numbers below the ''break-even'' point of 50 mean that a preponderance of remodelers are telling us that things have slowed down since the previous quarter.

In a declining market, we look for the RMI to get back up to 50 as an indication that the market has bottomed out and is ready for an upturn. At 41.5, it may seem that the RMI still has a way to go to reach break-even, but a couple of key RMI components have gotten much closer.

The RMI is divided into two main sections: one on current market conditions, the other on indicators of future activity. Among the current market RMI components in the fourth quarter, major ($25,000 plus) additions and alterations was up to 48.6. This is an important segment of the market for professional remodeling firms with business models that favor larger projects.

Look for increased success in turning the calls into signed contracts. This would show up in the RMI component amount of work committed for next three months. It greatly depends on improvements in credit markets enabling more homeowners to secure financing.

RMI is based on a survey that asks professional remodelers if activity in various segments of the market has gone up or down since the previous quarter. For the RMI or any of its components, 50 is a break-even point -where the number of remodelers saying that activity is higher exactly equals the number saying that activity is lower.

- Courtesy of NAHB