WASHINGTON — Home repair and improvement projects account for 40 percent of all residential investments. However, a timely and reliable way to identify trends in the remodeling industry has been missing from the toolbox of economic analysts.
The Joint Center for Housing Studies at Harvard University has unveiled an economic indicator specific to the remodeling industry that was developed using data collected by the Remodeling Futures Program, a three-year analysis of the U.S. remodeling industry.
The development of the Remodeling Activity Indicator, and how it can be used to track trends and predict growth, was outlined by the center's senior research fellow, Kermit Baker, at the Nov. 4 Construction Forecast Conference at Georgetown University in Washington, sponsored by the National Association of Home Builders.
Baker also is project director for the Remodeling Futures Program and chief economist for the American Institute of Architects.
Before the RAI was developed, the only source of such data was the Expenditures for Residential Improvements or Repairs, a quarterly report of the Department of Commerce.
The drawback to the Commerce Department's report, also known as the C50, is that the information is several quarters old by the time it is released, and the data is derived from an insufficient sampling of American homeowners, according to the Harvard study.
Deriving data from manufacturers' shipments of floor and wall tile products, retail sales at building materials and supply stores, sales of existing single-family homes and the bank prime lending rate, the center's RAI shows that, ``in general, the remodeling industry is expected to grow as fast as the overall economy,'' Baker said.
Growth as of October, compared with the previous four-quarter period, was 4 percent, he said.
The RAI helps analysts determine growth and predict trends in what is expected to be an $88 billion industry in 1998, Baker said, adding that industry growth is expected to show an increase of 35 percent from 1995-2010.
As a result, he said, a company can use the RAI to evaluate its overall performance in the industry, determine its share of the remodeling market at certain stages of the business cycle and identify evolving trends, according the center's report.
The RAI will be released by the Joint Center for Housing Studies during the third week after each quarter's closing. In 1999, RAI release dates will be Jan. 19, April 20, July 20 and Oct. 19.
``With everything I've seen so far, they are on the right track,'' said Julie Zuerner, a sales and marketing analyst for Variform Inc. who attended the conference. Variform is a vinyl siding maker based in Kearney, Mo.
Jerry Blais, marketing planning analyst for Alcoa Building Products in Sidney, Ohio, said the indicator still will be ``a very good tool'' for an industry starved for timely data.
``There is nothing out there that's timely. By the time we get it, it's history. We won't be making huge decisions'' from the RAI, he said, but it will be useful for tracking general trends in the industry.
Zuerner said that to be truly useful, an indicator for the remodeling industry must be broken down by states and individual market categories.
Kevin Berning of Armstrong World Industries in Lancaster, Pa., agreed.
``We're obviously most concerned with remodeling and who's putting in floors,'' he said, adding that a breakdown showing how many floors are installed by do-it-yourselfers and professionals also would make the RAI more useful for his company.
Those involved in the remodeling industry, however, shouldn't hold their breath waiting for such detailed breakdowns — either by product or by state.
``That is well beyond what we hope to accomplish with this,'' Baker said.
Like any other indicator, such as the gross national product or housing starts, the RAI is intended to be ``a snapshot as to how the industry is doing.''
Baker said he will release the final report on Phase I of the Remodeling Futures Program — which, he said, is a more comprehensive version of his presentation in Washington — during the International Builders Show in Dallas in January.
Baker said Phase II of the program, which begins in January, will be a two-year study building on initial research by finding more data resources to track and create more visibility for the remodeling industry.