Hanley Wood Releases Q1 2011 Residential Remodeling Index (RRI)—Remodeling and Replacement Activity Experience a 1% Decline

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The level of remodeling and replacement project activity nationally declined in the first quarter of 2011, according to the latest release of the Residential Remodeling Index (RRI) by Hanley Wood. The seasonally adjusted first quarter national composite of the RRI registered a score of 77.41, which was a decline of 1% over the downwardly revised fourth quarter 2010 result of 78.46. The last two quarterly readings essentially reversed the trend that showed improvement nationally in the first half of 2010.

The level of remodeling and replacement project activity nationally declined in the first quarter of 2011, according to the latest release of the Residential Remodeling Index (RRI) by Hanley Wood. The seasonally adjusted first quarter national composite of the RRI registered a score of 77.41, which was a decline of 1% over the downwardly revised fourth quarter 2010 result of 78.46. The last two quarterly readings essentially reversed the trend that showed improvement nationally in the first half of 2010.

The first half of 2010 had shown remodeling activity was on the rebound with the bottom having been recorded in the last quarter of 2009. The 2010 improvements had been the first since the beginning of 2007. The RRI measured the peak to trough for remodeling activity was a decline of 22%. But after gains in activity of approximately 1% quarter over quarter in the first half of 2010, the third quarter ran out of steam, and the fourth quarter registered a decline. Now the first quarter is showing nationally that activity slowed further, registering essentially the same reading as the bottom recorded at the end of 2009.

Hanley Wood is now forecasting remodeling activity to decline further over the next two quarters before steady improvements begin again in the latter part of 2011 and into 2012.

“Essentially what the RRI is revealing is that remodeling and replacement is continuing to experience a slight decline when we look at the aggregation of activity nationally,” said Jonathan Smoke, Hanley Wood’s Executive Director of Research. “We had hoped that our previously flat forecast expectations would have been revised upward as 2011 seemed to start with much more positive economic expectations than what we had late in 2010. But, the short term expectations for the U.S. economy have only grown more pessimistic lately. With oil over $100 per barrel, the disaster in Japan, and now political battles over the deficit, it seems that the economy, and more importantly, the consumer, can’t seem to catch a break. Now that most economists are revising down the expectations for the year, so too is our forecast for remodeling activity.”

“The silver lining in this more negative forecast for the year is that we continue to see significant differences in activity and expectations for local markets in 2011 that get averaged out in the national numbers. The healthiest markets are performing well better than the national average, and some markets are seeing increases in activity already,” says Smoke. “For example, Austin hasn’t seen any real deterioration and is expected to improve slightly over the year. Of the largest markets in the country, the shining star is possibly Minneapolis where we measure they had a solid increase in activity of 1% in the first quarter and where we expect total activity to increase 7% over the next four quarters.”

About the Residential Remodeling Index
The RRI is a quarterly measure of the level of remodeling activity in 366 metropolitan statistical areas (MSA) in the U.S., with the national composite reflecting the national level of activity. “Activity” includes home improvement and replacement projects, but does not include maintenance or projects of less than $500. The seasonally adjusted index shows the relative level of activity in the geography specified (MSA or national composite) compared to 2007 (the baseline year). A number above 100 indicates a level of remodeling activity higher than the level of activity at the beginning of 2007, which was the peak of remodeling activity in the prior decade.
The index is produced through a statistical model that leverages detailed data on remodeling activity, including household level remodeling permits, and consumer reported remodeling and replacement projects. Quarterly historical results for the national composite and for each of the 366 Metropolitan Statistical Areas in the U.S. are available back to 2004.

About Hanley Wood
Hanley Wood is a leading business-to-business media company focused on the residential and commercial construction and design industries. Its diverse portfolio includes magazines, Websites, e-newsletters, exhibitions and conferences, custom marketing and data services.

Hanley Wood is comprised of four operating platforms: Business Media, which publishes more than 30 magazines, featuring BUILDER and ARCHITECT magazine, along with related Websites, e-newsletters, and conferences; Exhibitions, which produces marquee events such as World of Concrete, bringing residential and commercial construction professionals face-to-face with manufacturers, suppliers, distributors, and service providers; Market Intelligence, which collects and aggregates proprietary data sets that capture hundreds of pieces of profile and material information about housing developments in more than 75 housing markets; and Marketing, which plans, creates, and executes strategic and integrated marketing solutions for its clients. http://www.hanleywood.com.

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Rick Strachan
Hanley Wood, LLC
202.736.3332
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Executive Director, Residential Remodeling
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