Thursday, January 19, 2012

Remodeling activity in U.S. West outpaces other regions in November

Residential remodeling activity increased 33.4 percent in the Western U.S. from November 2010 to November 2011. According to the November 2011 Residential Buildfax Remodeling Index, released this week by BUILDERadius, The Western U.S. showed the largest rate of increase, by far, in its index for November 2011, outpacing all other regions and the U.S. as a whole.

According to Buildfax's November 2011 release:

In November, all regions except the northeast posted year-over-year gains. The West was up 43.7 points (43%) year-over-year while the Midwest was up 14 points (13%) year-over-year. The South was up 8.9 points (10.6%) year-over-year, and the Northeast was down 5.3 points (6.8%) year-over-year.

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 six months. Growth rates have been solid in recent months. November 2011's year-over-year change was considerably larger than November 2010's year over year increase.

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 solid increases in recent months suggest an increasing willingness on the part of homeowners to spend on remodeling. Home sales data, meanwhile, suggests that fewer buyers mare making the decision to actually purchase a new home.

The Buildfax press release states that the rise in remodeling activity in most of the nation reflects a national trend in which homeowners have been spending on remodeling as an alternative to home home purchases in a market in which it is difficult to sell one's home.

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.