Monday, June 20, 2011

Buildfax:Remodeling activity increases 18 percent in West

Residential remodeling activity increased 18 percent in the Western U.S. from April 2010 to April 2011. According to the April 2011 Residential Buildfax Remodeling Index, released last week by BUILDERadius, The Western U.S. showed the largest rate of increase in its index for April 2011, outpacing all other regions and the U.S. as a whole.

According to Buildfax's April 2011 release:

In April, all regions posted month-over-month gains, and only the Midwest posted a year-over-year loss. The West was up 16.8 points (18%) year-over-year and up 5.3 points (5%) month-over-month. The Midwest was down 16.9 points (19%) year-over-year and up 10.7 points (17%) month-over-month, recovering slightly from a lower-than-average March. The Northeast was up 3.2 points (5%) year-over-year and 9.1 points (14%) month-over-month, and the South was up 9.6 points (11%) year-over-year and 10 points (12%) month-over-month.

According to Joe Masters Emison, vice president of research and development at BuildFax, “April traditionally sets a baseline for the rest of the year in residential remodeling activity, and April 2011 is the best we’ve seen since the beginning of the index in April 2004.”

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. Although growth rates have been solid in recent months, April's year-over-year percent change was nevertheless the smallest change since December 2010.

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.

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 the April report.

The big exception is the Midwest region, which has shown substantial decreases in remodeling activity over the past two months. Buildfax theorizes that this may reflect unusually cold weather in the Midwest during the early part of Spring this year.

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.