Remodeling index declines
According to the BuildFax Remodeling Index (BFRI), residential remodels authorized by building permits in the United States in December were at a seasonally adjusted annual rate of 2,725,000. This is 6 percent below the revised November rate of 2,895,000 and is six percent below the December 2011 estimate of 2,901,000.
Although the national rate fell, regions performed differently, with the Northeast rising 39 percent for the month and 37 percent compared to December 2011, while all other regions falling. The South Remodeling Index fell 13 percent from November, and one percent from December 2011, while the Midwest region saw an eight percent decline in remodeling for the month and 17 percent for the year, with the West region dropping 16 percent from November and eight percent from December 2011.
“Repairs from super-storm Sandy attributed to the influx of Northeastern residential remodeling in December,” said Joe Emison, Chief Technology Officer at BuildFax. “The last time the Northeast broke 600,000 estimated residential remodels was five years ago. Unfortunately, the rest of the country saw both month-over-month and year-over-year declines in residential remodeling activity.”
Remodeling index and the economy
Typically, as remodeling levels increase, it is seen as a sign of homeowners staying put, so while it may appear that a drop in December implies an increase of homeowners moving out, the decline isn’t as dramatic as that, and is in line with normal sector undulations, as seen in the graph above. The National Association of Home Builders reported a five year high for remodeling in the final quarter of 2011, and a seven year high in the third quarter of 2012, with several dips in between those spikes.
Remodeling is still trending up in general, despite a setback, and it is foreseeable that the Index will actually improve as inventory of homes available for sale remains so restrictive, forcing some homeowners to stay put.