Residential Remodelers NAICS 236118

Apr 17, 2025 - Remodeling Index Slips, but Remains in Positive Territory

• The NAHB/Westlake Royal Remodeling Market Index (RMI) reading for the first quarter of 2025 was 63, down five points from the fourth quarter of 2024, according to an April 2025 report by the National Association of Home Builders (NAHB). Any RMI reading over 50 indicates that most remodelers feel market conditions are good. In the first quarter, the Current Conditions Index portion of the RMI fell four points to 71 from the previous quarter. The Future Indicators Index component of the RMI dropped six points to 55. While the Q1 RMI data was gathered before the announcement and pause of reciprocal tariffs, remodelers are still concerned about trade strife pushing costs higher. However, several housing fundamentals largely support continued remodeling spending growth, including an aging housing stock, rising home equity, and “locked-in” homeowners with low mortgage rates unwilling to sell.
• Construction spending for residential improvements is forecast to rise 5% in 2025, down from 10% growth in 2024, according to FMI’s second-quarter 2025 North American Engineering and Construction Outlook. Record-high home values and high interest rates will prompt owners to make repairs and upgrades rather than move. Home improvement spending is expected to slip to 2% growth in 2026, but existing home sales, which are a demand driver for remodeling spending, are expected to gain steam in 2027, when home improvement spending will rise by 3%. Spending will continue to rebound to 4% growth in 2028 and 5% in 2029.

• Prices for construction inputs rose 0.5% in March, marking the third consecutive month of increases, according to Associated Builders and Contractors (ABC) analysis of US Bureau of Labor Statistics data. Primarily driven by sharply high lumber, steel, copper, and natural gas prices, construction input costs in March increased 0.8% year-over-year. Suppliers increased their prices even before the tariffs took effect, which complicated builders' purchasing and pricing decisions, according to Associated General Contractors of America (AGC). Ken Simonson, AGC chief economist said, “Lumber and metals prices shot up in March, while contractors’ inboxes are bulging with ‘Dear valued customer’ letters announcing further increases for many products, Rapid-fire changes in tariffs threaten to drive prices higher for many essential construction goods.”
• Tariffs, deportations, and high interest rates are giving some homeowners second thoughts about new home improvement projects, according to the Financial Times. In January, pending home sales hit an all-time low, according to The National Association of Realtors. Pending homes sales are an indicator of remodeling demand as homeowners often fix up homes before putting them on the market and buyers make improvements before moving in. In a recent earnings call, Home Depot’s CEO said that while the US’s aging housing stock is supportive of home improvement spending, an uptick in 2025 isn’t a given. The Trump administration’s deportation activities may also contribute to workforce instability for the construction sector, which may give some homeowners pause about starting major improvement projects.