While housing starts have been steadily declining since February, our recent survey of more than 500 remodelers shows a slight remodeling decline ahead too. This means that building material demand will almost certainly decline next year at the same time that supply is finally catching up to demand, resulting in:
- Building material price stabilization
- Labor availability among trades that work in both the new home and remodeling industries
This early remodeling indicator is very recent, as both Lowe’s and Home Depot reported strong remodeling growth in Q2:
Here are comments from some of the many remodelers whose large backlogs are starting to thin out.
- “A customer who pre-qualified to finance a $160K kitchen project at a lower rate early in the year was turned down when interest rates rose.”
- “Our company relies on clients doing HELOCs [home equity lines of credit]. This has dried up!”
- “Lead volume is decreasing as clients are finding it harder to finance via home equity.”
- “Some customers who had planned on financing or refinancing their homes to pay for jobs, are delaying until they can either save up cash or wait for interest rates to lower.”
- “Cash-out refinances or HELOCs to fund projects have taken a significant hit.”
Building materials dealers aren’t likely to experience the impact soon, due to the tremendous backlog of currently unfinished projects. Also, prices of the products that continue to experience commodity shortages will likely stay high.
Three primary drivers behind the recent growth in remodeling project backlogs have now shifted:
- 1. Return to normal demand: 33% of building materials dealers rated remodeling company traffic Strong in July, down from 61% in February, as new remodeling project commitments slowed.
- 2. Stabilizing project scope: 53% of remodelers now report that project sizes are no longer increasing in size and scope.
- 3. Improved product availability: 60% of remodelers reports that lead times are improving.
And we also remain very bullish on long-term remodeling demand, due to the number of homes entering the prime remodel years, all-time high levels of home equity, and homeowners deciding to upgrade their current home instead buying new.
Would you like real-time insights on the slowdown in residential remodeling?
Our latest US Remodeler Index Report is available to download for free!
Our US Remodeler Index (USRI) is delivered quarterly exclusively to our clients who subscribe to our research. For this quarter only, we are offering it for free to all that have access to this form. Enter your information below to download the full report.
This quarterly index is the result of a unique partnership between one of the industry’s leading authorities on professional remodeling trends, Qualified Remodeler, and John Burns Real Estate Consulting. The USRI benchmarks current industry growth, near-term project demand and is an independent, frontline view into market trends, shifts, constraints, and underlying drivers of professional home repairs and remodels. The USRI is derived from surveys of presidents, owners, and managers of hundreds of remodeling firms in all 50 US states.