CHICAGO–(BUSINESS WIRE)–Remodelers and home improvement professionals nationwide remain bullish about residential construction activity according to the latest U.S. Remodeler Index, a gauge of sentiment and remodeling activity conducted quarterly by Qualified Remodeler and John Burns Real Estate Consulting.
The most recent USRI release asked residential remodelers about the strength of their businesses today and into the future. For the first quarter of 2022, the aggregate reading was 67.7 on a scale where any reading over 50 is positive. Readings of 70 or above are strongly positive.
The John Burns team found four key takeaways.
- Big-project remodeling demand expands, driving pro activity. 58% of remodelers say project sizes increased in 1Q22. Large-scale projects are driving the market, and projects continue getting bigger despite rapidly rising costs. Remodelers are focusing on these larger projects, where clients are less budget conscious and willing to accept higher prices to get their project underway quickly.
- Material costs drive inflation; labor costs not far behind. Remodelers report double-digit inflation in every product category, ranging from 12% to 18%. Remodelers have raised prices to offset inflation, and many have shifted product and material price uncertainty onto clients through escalation clauses. Labor inflation is also widespread. Clients have taken the price increases in stride, but some remodelers note an uptick in postponements or pushback on price increases just recently.
- On product/material lead times: “green shoots” emerge. Remodelers (and their clients) have come to accept extremely long lead times for products. Now, there are early signs of improvement: remodelers are getting better at project planning and substituting products and vendors based on availability; project timelines are starting to stabilize; and some product lead times have compressed.
- 7-8% remodeling revenue growth expected in 2022, as economic and supply uncertainty tempers robust backlogs. Remodelers’ full-year revenue expectations are slightly lower than last year at this time, a result of elevated demand mixed with difficult comparisons and project delays. However, remodelers are generally optimistic given large backlogs. With constraints on both materials and labor, however, more of the 7-8% growth this year is likely to come from pricing and product mix than volume. Recent economic uncertainty has also tempered the outlook.
Direct questions to Eric Finnigan, director with John Burns at efinnigan@realestateconsulting.com. To learn more about Qualified Remodeler or SOLA Group Inc., contact Paul Degrandis at paul@solabrands.com.
