U.S. Remodeler Index (USRI) Pulls Back, Still 'Strong'
As consumers begin to pull back on spending, remodelers and home improvement pros say they're girding for slower demand. That's the result of the U.S. Remodeler Index for the third quarter of 2022, which ticked lower to a 62 reading, down from 65.7 in the second quarter?yet remains at a level of sentiment that is considered ?strong'. The index is a collaboration between Qualified Remodeler magazine and John Burns Real Estate Consulting.
The USRI is a diffusion index where a reading of 50 or above indicates growth. The 62 reading for Q3 2022 indicates that the remodeling market expanded during the quarter.
Launched in 2019, the USRI surveys three groups: specialty home improvement pros, full-service remodeling contractors and design-build remodeling professionals. During the third quarter design-build firms registered the most bullish reading (63.8) followed by home improvement pros (63.7) and full-service contractors (60.7). The 3Q USRI reading pegged current activity at 62.9, down from 65.3 previously. Activity for the next three months fell to 60.9, down from 67.3 previously. And the remodeling demand meter fell to 6.1, down from 6.5 in Q2. Remodeling demand is expressed on a scale of 1-10.
Analysts at Burns identified four key takeaways.
- Backlogs support remodeling. A 4.9-month average backlog among respondents continues to support remodeling and spending levels. Fifty-six percent of remodelers report at least four months of projects ?in-progress' or ?planned' with very low or rare project cancellations.
- Tighter budgets. Pricing power is shifting away from remodelers and building product companies as remodeling clients have less room to flex in their budgets; 55 percent of remodelers say customers are downgrading to stay within a budget.
- Supply chain issues continue to improve. More than two-thirds of remodelers now see some improvement on product lead times.
- Strong growth in 2022. Revenue growth for remodelers will range between 5 percent and 8 percent in 2022 with a slowdown coming in 2023.
"The USRI confirms the post-pandemic remodeling boom has passed," said Eric Finnigan, VP of research and demographics at John Burns. "With home values now declining and interest rates soaring, look out for a more significant slowdown in residential remodeling next year."
Email questions to Finnigan at [email protected]. To learn more about Qualified Remodeler or SOLA Group Inc. contact Paul DeGrandis at [email protected].
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