U.S. Remodeler Index Pushes Higher; Double-digit Revenue Growth Expected
Sentiment among remodeling professionals pushed to even higher levels in the second quarter of 2021, according to the third release of the U.S. Remodeler Index. The index, which surveys remodelers in three vertical markets in all 50 states, registered a confidence level of 75.3, up from a very strong 72.7 in the prior quarter.
The survey, which is a collaboration between Qualified Remodeler and John Burns Real Estate Consulting, is the basis of a diffusion index, where any reading over 50 is a positive reading. Last fall in the launch of the index the first reading was 57.1.
“The Q2 USRI demonstrates the compelling shift that we are seeing in remodeling spending after COVID, namely growth in deferred ‘big project remodels’,” says John Burns analyst Todd Tomalak. “We continue to worry about labor availability, but the favorable mix-shift in project size is encouraging. We are watching this segment closely in the second half of 2021 as we lap a decidedly tougher comparison in the second half of 2020. Overall we expect big-project remodel spending to continue to grow while DIY and small project slows.”
According to the John Burns team, there are four clear takeaways from the second quarter reading.
1. Larger-scale remodels are becoming the norm. 62 percent of remodelers say their average project size continues to increase as more consumers are opting for multi-room remodels. In addition to larger projects, 71 percent of remodelers who reported a shift in average price-point say their clients are spending more, noting that consumers are increasingly understanding the long-term value of high-quality products and materials.
2. Pipelines are bursting at the seams. Remodelers say they’re booked through 2021. Over 50 percent of remodelers across all industry segments report larger pipelines in 2Q21 vs. the same prior year period. With manufacturing lead times extending into Spring 2022 and labor shortages at an all-time high, remodelers are purposefully extending their project timelines in an effort to ‘meter’ work and catch up on growing backlogs.
3. Some consumers are considering “hitting pause” on their projects. 53 percent of remodelers report client project cancellations or postponements in Q2 2021. Remodelers note that cancellations and postponements have been minimal but escalating prices and labor and product delays have made some consumers decide to hold off on remodels for the time being.
4. Double-Digit Revenue Growth of 11 Percent Expected for FY 2021. Demand is bullish, fueling remodeler confidence in full-year 2021 revenue expectations. Remodelers urge manufacturers to minimize product lines and focus on reducing lead times for ‘hot ticket’ items like high-end cabinetry and appliances. On average, remodelers expect revenues to grow +11 percent in 2021, which is slightly lower than last quarter’s read of 12 percent.
Steve Basten, also a vice president with John Burns, emphasized the number of varying forces at play in the remodeling market, forces that require close monitoring.
“We’re in one of the most unique periods of remodeling activity in history,” says Basten. “Over the past year consumers have been dreaming up and saving for a dream-home project and all this pent-up demand is finally starting to play out. I expect we’ll continue to see strong demand for whole-home remodels through the end of 2021, despite labor shortages and elongated project timelines. Homeowners have ‘waited this long’ and most aren’t going to abandon their plans now. We will continue to monitor the voice of the remodeler closely and be the first to report on any industry slowdown.”