Two major indicators of home remodeling activity are pointing to a decelerating market throughout 2015, but investors seem to be confident that remodeling companies and supporting retailers will continue to be profitable nonetheless.
The National Association of Home Builders released its Remodeling Market Index for the first quarter of 2015 on April 23. It was set at 57. Any RMI figure above 50 indicates that more remodelers say they have more activity than they did in the past quarter than say they have less activity; the current figure is above that key point, but lower than the 60 set in the last quarter of 2014. That means that the market is growing but at a slower rate.
The latest Leading Indicator of Remodeling Activity, set by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University, tells a similar story; it predicts home improvement spending will fall to only 2.9% in by the fourth quarter of 2015, as opposed to 6.5% in the first quarter.
Yet investment experts are still positive regarding the remodeling market, Bloomberg Business reported April 23.
The SandP Homebuilding Select Industry Index — a subset of the Standard and Poor’s 500, made up of 35 prominent housing-related companies — has been outpacing the general SandP by approximately 14 percentage points over the last few months.
Advisors have also been upgrading recommendations on key market players such as Home Depot and Lowe’s.
Part of the reason for current confidence could be that the U.S. housing market saw a record increase in existing home sales in March, according to data released April 22 by the National Association of Realtors. (The sales of existing homes are much more relevant to the remodeling market than new-home sales, since buyers tend to customize their purchases with everything from custom made cabinets to new flooring to high-end spa baths.)
“We have seen more remodeling in the last quarter for kitchen and bathroom cabinets,” says Joe Wilda Jr., President, Tri-Star Cabinet & Top Co., Inc. “Painted cabinets are the trend now in gray tones. Also starting to see more new homes, but remodeling is largely on the increase for existing homes and people buying older homes and remodeling them.”