With Construction Spending Stagnant, are Homeowners Remodeling?

August 02, 2011

Spending on construction projects in the United States grew for the third straight month in June, though extremely modestly.

U.S. construction spending rose 0.2 percent in June to a seasonally adjusted annual rate of $772.32 billion, according to the Commerce Department.

Economists had expected an increase, but only by 0.1 percent.

Construction spending has dropped 4.7 percent for the 12 months ending in June.

Private construction spending increased 0.8 percent in June to mark its third straight gain. Homebuilding outlays fell 0.3 percent.

guy staining a wood floorWith little new housing growth and the difficulty homeowners are having in selling their existing homes, many are staying put and remodeling their current abodes. Right?

“Remodelers have experienced the same hiccup that has rippled through the U.S. economy,” said National Association of Home Builders Remodelers Chairman Bob Peterson, CGR, CAPS, CGP. “After picking up the pace early in the year, the calls from customers dropped off and remodeling slowed down.”

The NAHB Remodeling Market Index (RMI) fell from 46.5 in the first quarter of this year to 43.9 in the second. A good score would come in over 50.

The index in the Midwest fell from 47.1 in the first quarter to 44.4 in the second. The South also posted a drop from 46.1 to 42.9. The West (from 46.1 to 48.2) and the Northeast (from 46.1 to 48.1) both posted slight increases.

The index has three indicators of current market conditions:

*Major additions: Fell from 50.3 in the first quarter to 46.2 in the second quarter.

*Maintenance and repair: Fell from 39.5 to 38.4.

*Minor additions: Increased ever so slightly from 48.0 to 48.5.

The index also rates future business:

*Calls for bids: Fell from 53.1 in the first quarter to 49.8 in the second.

*Backlog of remodeling jobs: Fell from 49.7 to 45.7.

*Appointments for proposals: Fell from 52.4 to 44.2.

The amount of work committed for the next three months stayed relatively flat at 32.3 from 32.1.

“While the RMI indicates that the home remodeling market softened somewhat in the second quarter, this is still the second highest RMI we’ve been able to report since the third quarter of 2007,” said NAHB Chief Economist David Crowe.

“There are several barriers blocking the way to a stronger recovery. Home owners who may want to remodel still face stringent lending requirements, and uncertainty about the economy is making them hesitant to undertake major improvements.”

Categories: Economy, Remodeling

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