Tuesday, October 18, 2011

Remodeling index: West region remodeling increases 33 percent

Residential remodeling activity increased 33.6 percent in the Western U.S. from August 2010 to August 2011. According to the August 2011 Residential Buildfax Remodeling Index, released this week by BUILDERadius, The Western U.S. showed the largest rate of increase in its index for August 2011, outpacing all other regions and the U.S. as a whole.

According to Buildfax's August 2011 release:

In August, all regions except the Northeast posted month-over-month gains, and only the Northeast posted a year-over-year loss. The West was up 35.3 points (33.6%) year-over-year and up 11.9 points (9.3%) month-over-month. The Midwest was up 11.7 points (11%) year-over-year and up 11.4 points (10.8%) month-over-month. The Northeast was down 3 points (3.9%) year-over-year and 0.6 points (0%) month-over-month, and the South was up 7.6 points (8.2%) year-over-year and 1 points (1%) month-over-month.

In the graph, we see that the year-over-year percent change in the western region has outpaced all other regions and the U.S. as a whole for the past three months. Growth rates have been solid in recent months, and August's year-over-year percent change for both the West and the US were the largest in more than ten months.

Overall, the report suggests substantial increases in the amount of residential remodeling activity in the economy. Often, remodeling activity reflects an availability of household capital for some construction and home-improvement activities while there may be an absence of the large amounts of household capital necessary for relocation and new home purchases.

The Buildfax press release makes the plausible claim that the most growth in residential construction right now is found in multifamily construction and in remodeling.

As we've seen in recent data for new home sales and housing starts, new home construction remains at historic lows. Many homeowners turn to remodeling projects, as is reflected in recent Buildfax reports.

The exception is the Northeast region, which has shown only slight growth and some declines in recent months.

As a supplement, I've included the second graph which shows the year-over-year change in the numeric value of the index by region.

About the BuildFax Remodeling Index

The BuildFax Remodeling Index is based on construction permits filed with local building departments across the country. The index tracks the number of properties permitted. The national and regional indexes all have an initial value of 100 set in April of 2004, are based on a three-month moving average, and are not seasonally adjusted.