The remodeling segment of the housing market is quickly increasing. In February, it was nearly 10 percent above last year’s level. The market for new home construction, however, continues to grow less rapidly, with spending rising 3.2 percent compared to this time last year.
This is shown in the graph below, where we see that remodeling spending jumped from a $148.5 billion rate last February, to the $162.7 billion rate attained this year.
The strong performance of the remodeling market is also shown by the increase in the number of employees working in remodeling firms. The number of workers in the remodeling industry jumped from 312,000 in February 2016 to 339,400 as of this past February, a gain of 8.8 percent over the 12-month period.
In fact, employment in remodeling is one of the fastest growing areas in the residential construction sector. Its growth over the past year is second only to General Contractor Firms involved primarily in multifamily construction; which grew nearly 10 percent over the 12 months ending in February.
Employment in Residential Construction Firms grew by 6.6 percent, with Single Family General Contractors gaining 4.6 percent over the last 12 months.
Employment in Residential Construction Firms grew by 6.6 percent, with Single Family General Contractors gaining 4.6 percent over the last 12 months.
The chart below displays new job trends over the last five years. The blue bars depict the number of jobs added each month, and the red line is a six-month average.
We see a gradually declining trend in job growth. The average number of jobs has fallen from 250,000 in 2014 to around 200,000 for the last year or so.
The mortgage rate also fell again last week, to 4.10 percent. This is the third consecutive decline in mortgage rates despite the Fed’s move toward higher rates. This may be due partly to weak demand for mortgage loans—the percentage of homes sold for cash rose to 27 percent, up from 25 percent in January.
Manuel Gutierrez, Consulting Economist to NKBA, economist @nkba.org
Explanation of NKBA’s Economic Indicators Dashboard
The dashboard displays the latest value of each economic indicator. Note that all the data, except for “mortgage rate” and “appliance store sales” are seasonally adjusted and are represented at annual rates.
Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately-owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.
Single Family Starts. It is the number of single family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.
Existing Home Sales. These data are issued monthly by the National Association of Realtors, and capture the number of existing homes that were sold in the previous month.
High-End Home Sales. This series represents sales of new homes priced at $750,000 and over. The data are released quarterly by the U.S. Department of Commerce, and are not seasonally adjusted. Thus, a valid comparison is made to the same quarter of prior year.
Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.
Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.
Building Materials Sales. These data, released monthly by the Department of Commerce, capture the total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also include sales to projects other than residential houses.
Appliance Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as Home Centers.
We hope that you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further detail.
