2021 Third Quarter Up From Third Quarter of 2020 For the NAHB/Royal Building Products Remodeling Market Index (RMI)

 

The remodeling industry confidence has seen an improvement year over year when it comes to home remodeling. The National Association of Home Builders just put out its NAHB/Royal Building Products Remodeling Market Index (RMI) for the third quarter which saw a reading of 87. This is five points above the reading of the third quarter in 2020.

“Demand for remodeling remains strong, and remodelers are doing quite well as long as they can adequately deal with material and labor shortages,” said NAHB Remodelers Chair Steve Cunningham, CAPS, CGP, a remodeler from Williamsburg, Va. “So far, a substantial share of their customers have been willing and able to tolerate the extra cost and delays of requested remodeling projects.”

The RMI was changed in 2020 in response to a need to "improve its ability to interpret and track industry trends." Seasonally adjust quarter to quarter data cannot be compared due to the redesign. The quarterly data is gathered now by asking remodelers to compare the market conditions during the survey quarter as better, about the same or worse. Interestingly enough, 78% of those who answered the survey rated the current market about the same.

The Current Conditions Index also came up with an increase from 2020. The third quarter of 2021 averaged 90 which is a four-point increase from the third quarter of 2020. Each component compared had an increase. These components include large remodeling projects ($50,000 or more) rose six points to 86, moderately-sized remodeling projects (at least $20,000 but less than $50,000) increased five points to 91 and small remodeling projects (under $20,000) inched up one point to 91.

The Future Indicator Index was up seven points from the third quarter of 2020 at an average of 84 in the third quarter of 2021. The components measured in this index are the current rate at which leads and inquiries are coming and the backlog of remodeling jobs. The leads and inquiries rose to 83 points and the backlog rose to 85 points.

“We are seeing strong demand and continued optimism in the residential remodeling market, despite the fact that supply constraints are severe and widespread,” said NAHB Chief Economist Robert Dietz. “For example, well over 90% of remodelers in the third quarter RMI survey reported a shortage of carpenters. And 57% of remodelers reported having slightly raised prices for projects over the last six months, with another 28% indicating a significant increase in price, due in part to higher material costs and ongoing strong demand. Half of these remodelers reported some pricing out of demand due to higher prices for remodeling projects.”

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Buyers’ Must-Haves When It Comes to Kitchen and Bath Features

The National Association of Home Builders' publication What Home Buyers Really Want, 2021 Edition, gave us the top features buyers want in a kitchen and a bathroom. In the kitchen, four out of every ten buyers feel that a double sink is essential and expressed they would probably not purchase a home without this feature. For bathrooms, most buyers said it was essential for a separate shower and tub in the primary bathroom.

The kitchen top 10 kitchen features that rated essential or desirable were a double sink (side-by-side) 81%, walk-in pantry 81%, table space for eating 78%, a central island 77%, drinking water filtration 76%, granite/natural stone countertops 73%, recessed lighting 69%, customized backsplash 69%, pull-out shelves 68% and a breakfast bar 64%.

Broken out by buyers who say it is essential and buyers who say a feature is desirable were surprising. For the top 10 features that were essential 42% of buyers said a double sink, 35% table space for eating, 34% chose a walk-in pantry, 32% said a central island, 32% drinking water filtration, 26% granite/natural stone countertops, 26% recessed lighting, 23% customized backsplash, 22% pull-out shelves and 19% breakfast bar.

Bathrooms are deemed very important to today's buyers, especially the primary bathroom. The top ten on the list for the home's primary bathroom were a linen closet 76%, both shower stall & tub 74%, double vanity 69%, private toilet compartment 67%, toilet, tub & sink-white 65%, granite vanity 65%, ceramic tile walls, multiple shower heads 59%, whirlpool tub 56% and body spray panel 56%.

Buyers who said that the bath shower stall & tub were essential ranked the highest at 36% while the linen closet ranked the highest in desirable at 49%. The lowest-ranked feature for both essential and desirable were dual toilets.

If you are in the market for a new home, now is the time to purchase one due to historically low interest rates. Remember to use a Realtor who can help you with the process from choosing a home to closing.

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Tips On How To Budget For Home Renovations

 

Whether it is a full renovation or just some minor updates, it is always important that you budget for your home remodel. The rule of thumb is that most upgrades or renovations increase your home’s value but this is not always the case if you do not stick to your budget and renovation plan. Here are five things to do when determining your budget for the project.

 

Estimate home renovation costs

Just like any other investment you do not want to put more money into the project than you can get in return. First, determine the value of your home.  If you are updating specific rooms, you will want to determine the percentage of worth of the room.

A kitchen accounts for 10 to 15 percent of the home’s total value. For example, if your home is worth $200,000 you will want to spend no more than $30,000 on the total kitchen project. If you are looking for the biggest bang for your buck, then a mid-range bathroom remodel will get you the best return on your investment.

Consider home remodeling loan options

It can take a lot of cash to do a big renovation and this can sometimes detour homeowners. There are many loans that are available for this specific purpose.

One option is to refinance your home. Right now mortgage rates are at an all-time low, so you have the option of refinancing for an amount higher than you currently owe. You will be able to pay off your current loan and have cash left over for your home improvements.

Another option is to Cash-out refinance by taking your existing loan and refinancing it for more than you currently owe. You will then have enough money to pay off your original mortgage and make your renovations.

Many homeowners do not want to take the refinancing option, but they still have options. A home equity line of credit (HELOC) that works like a credit card is a way to go. You are given a set limit that you can borrow against.

A home equity loan can also get you the money you need for your projects. With this option, you take out all of the cash at one time. This will be in addition to your original mortgage.

Get home renovation quotes from contractors

It is always a wise decision to go into a project with some sort of estimate on how much the project will cost. A contractor will be able to give you an estimate based on your project. You will want to allow for more cost because a project usually costs more than what the estimate states. The more information you are able to give a contractor the closer the estimate can be to the true cost.

Just like shopping around for the best price or best product, it is always wise to get several quotes from several different contractors. Never just take the lowest bid, make sure you know what materials are being used and the process the contract will take to complete your project. Lower bids tend to be a sign that the contractor cuts corners.

Stick to the home remodeling plan

Just like a trip to the grocery store, to stay on budget you have to stick to your grocery list. It is always a temptation to add little projects here and there to your current remodeling project. These last-minute additions can add up. Remember that every time you change your mind even little changes can be costly to your budget.

Account for hidden home renovation costs

As mentioned before an estimate is only an estimate. The project might look like an easy fix, but there might be other issues lurking beneath the surface. Always give yourself a cushion upfront. Every contractor can agree that most renovation projects usually cost more due to hidden imperfections. Add 10 to 20 percent to your estimated project cost.

Home improvements are in most homeowners’ reach, the trick is figuring out how to plan a home renovation that doesn’t break the bank. It is best to consult with professionals such as a mortgage lender and contractor to help with estimated cost and obtaining the money to give the go-ahead.

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