In other economic news, consumer and producer price indices remained relatively unchanged in April. The Consumer Price Index was unchanged, in part due to a 1.7% decline in energy prices, despite gasoline prices peaking at $4 a gallon in April. Declining natural gas prices were responsible for the overall drop. Moving in the opposite direction, residential rents were up more 2% in April, adding to the relative affordability of home purchases. Producer prices were slightly down in April, with a small decline in the much-watched price of gypsum, reducing its year-to-date increase for 2012 to 11.6%.
May is National Remodeling Month, and with this in mind, NAHB Economics continues to examine the issues involving the remodeling sector. While the economic benefits of home building are often cited in the media, remodeling has similar economic benefits. NAHB estimates that every $10 million of remodeling activity generates on average 78 local jobs, plus additional economic benefits in business income and state and local tax and fee revenue.
Remodelers who are NAHB members tend to work on larger projects, according to recent survey results. In fact, more than one-third of jobs undertaken by NAHB remodelers have a final price tag of $50,000 or more. The data also indicate that NAHB remodelers perform about 95% of projects totaling $100,000 or more but only about 20% of jobs costing $2,500 or less.
NAHB survey data indicate that the main drivers of remodeling remain constant. Survey data from the first quarter of 2012 find that the “need to repair/replace old components” and “desire for better/newer amenities” are still why most customers choose to remodel their homes, as compared to other options including energy efficiency and increasing the value of the home as an investment. The data reinforce the notion that owners are interested in enhancing the spaces in their homes more for themselves than future owners.
Finally, NAHB recently critiqued a report from the Government Accountability Office (GAO) that suggested possible changes to the widely used section 25C remodeling tax credit for energy-efficient upgrades to existing homes. The heart of the NAHB critique was that the GAO report missed the most salient point: the tax rule expired at the end of 2011 and should be extended to continue its policy benefits.