The National Association of Home Builders' (NAHB) Remodeling Market Index (RMI) for the third quarter hit 50 for the first time since the same period in 2005 as builders who specialize in remodeling report higher levels of activity.  The index was at 45 in the second quarter.

The RMI is derived from a monthly survey of NAHB professional remodeler members who are asked a series of questions that are assigned numerical indices to calculate two separate indexes and the RMI, a composite of the two.   The first index gauges current market conditions based on the respondents' reports about major and minor additions, maintenance work and repairs on both owner occupied and rental properties.  The second index measures indicators of future activity based on calls for bids, committed projects, job backlogs, and appointments for proposals.

The component measuring current market conditions was up 6 points to 52 and the future indicator components rose to 49 from 44.  Any score above 50 indicates that more remodelers view market conditions as improved than in the previous quarter.

 "The strength of the RMI, especially in owner-occupied properties, shows that home owners are investing in remodels as home prices stabilize," said NAHB Remodelers Chairman George "Geep" Moore Jr. "As owners become more confident that investments in housing will hold their value, they are beginning to undertake projects to improve their comfort that they had been putting off."

NAHB provided details of builder responses in each category; all improved and many scored large increases. Among the indicators of current market conditions, maintenance and repair activity rose to 56 from 50, minor additions and alterations to 51 from 47, and major additions and alterations to 49 from 42.  Current remodeling activity was particularly strong in owner-occupied housing where each of the sub-categories above had scores ranging from 55 to 60.  Scores for current market conditions also held steady or improved in all four regions of the country.

In the sub-categories for future market conditions calls for bids increased 44 to 48; amount of work committed for the next three months to 46 from 43, backlogs from 46 to 50 and appointments for proposals to 51 from 43.  Future market indicators in the Northeast fell three points to 38 but the other three regions each rose to 50 or above, increasing a minimum of 4 points.

"The improvement in the RMI provides more evidence that the remodeling industry is making the orderly recovery from its low point in 2009 as we've been expecting," said NAHB Chief Economist David Crowe. "Although remodeling projects over $25,000 are now showing some signs of strength, they are still lagging behind smaller property alterations and maintenance and repair jobs. The recovery of the remodeling market in general, and large projects in particular, continues to be constrained by factors such as tight credit and problematic appraisals."