Market Trends August 2022
Remodeling Confidence Drops
The NAHB/Westlake Royal Remodeling Market Index (RMI) fell 10 points to 77 in the second quarter, compared to the second quarter of 2021. While the reading is still positive, many remodelers are seeing signs of a slowdown. Any number over 50 indicates that more remodelers view remodeling market conditions as good than poor.
More customers are reportedly reluctant to go ahead with projects because of higher costs, delays and higher interest rates. The Current Conditions Index averaged 83, dropping eight points compared the second quarter of 2021. All three components declined as well: the component measuring large remodeling projects ($50,000 or more) fell 11 points to 79, the component measuring moderately-sized remodeling projects (at least $20,000 but less than $50,000) dropped seven points to 84 and the component measuring small remodeling projects (under $20,000) declined by six points to 86.
The Future Indicators Index dropped 11 points to 72 compared to the second quarter of 2021. Leads and inquiries fell 13 points to 68 and the backlog of remodeling jobs dropped 10 points to 76. However, NAHB’s forecast continues to have remodeling outperforming single-family construction in 2022 and 2023 in terms of growth rates.
To track quarterly trends, the redesigned RMI survey asks remodelers to compare market conditions to three months earlier, using a “better,” “about the same,” “worse” scale. Twenty-one percent of remodelers said the market had gotten worse in the second quarter of 2022, compared to only 11% who said it had gotten better. This is the first time the “worse” has exceeded the “better” percentage since the first quarter of 2020 at the onset of the pandemic.
Popular Summer DIY Projects
Online professional marketplace Thumbtack combed its database of millions of home projects across the US to come up with a list of the most popular outdoor and indoor projects for summer 2022. Outdoor upgrades are at the top of the list, as homeowners look to create an 'outdoor oasis' where they can host, relax, and spend quality time with their families
Coming in at #1 and #2, respectively, are landscaping and tree trimming. Next in line is fencing and gate installations, followed by exterior painting, concrete installations, and deck/porch remodeling. People want to spruce up or expand existing decks or install a new one, since a nice deck, porch or patio has become a staple for outdoor entertaining, indoor/outdoor space and even remote working.
Homeowners are thinking beyond the basics to reimagine outdoor living space and Thumbtack has seen a 303% increase in play equipment construction, and a 381% uptick in gazebo installation and construction.
The most popular indoor projects under $1,000 include interior painting, TV mounting, floor installations, drywall texturing, lighting installations, tile installations, fan installations and wallpaper. On the pricier end, bathroom remodels (average spent $5,000) and home remodeling services, $2,500.
Inflation Nation: Recession or Relief?
The median probability of a recession over the next 12 months is 47.5%, up from 30% in June, according to a Bloomberg survey of economists completed last week. Banks, including Citigroup, Deloitte and PNC Financial Services, previously predicted a slowdown in 2023, but recent forecasts say a recession could occur in 2022 or earlier in 2023 than formerly expected.
Bank of America economists project that the US will enter a mild recession this year and will experience a total of five quarters of negative growth before emerging in the second quarter of 2023. They believe the Fed will ease back on rate hikes for the remainder of this year, pause rate hikes in the first half of 2023 and begin cutting rates by the second half and into the first half of 2024. Wells Fargo has changed its outlook from an economic “soft landing” to a “mild recession” in the first quarter of 2023. A key factor in that revised outlook is May and June inflation data from various sources.
Treasury Secretary and former Fed head Janet Yellen and other economic advisors are downplaying recession fears. She told Meet the Press that the economy is in "transition" and there is a "slowdown, but it is not in a recession. Growth is simply slowing from the extraordinarily high growth recorded last year. While there is no steadfast rule governing what defines a recession in the US, it is commonly understood to be two consecutive quarters of GDP shrinking. But a technical recession is officially defined by a small group of economists on the Business Cycle Dating Committee. They define a recession as involving "a significant decline in economic activity that is spread across the economy and lasts more than a few months." Director of the National Economic Council Brian Deese argued that the second quarter data, which reflects the April through June period, is "inherently backward-looking," and pointed to the very strong job market and solid consumer spending, saying that we’ve never had a recession where the economy was creating jobs, never mind an average of 400,000 jobs a month. Economists say the economy is resilient, people are just fed up with inflation. But that does not make it a recession.
Retailers Capitalize on Prime Day
US online sales during the two-day Amazon Prime Day shopping event jumped 8.5% from last year to nearly $12 billion, as inflation-hit Americans pounced on discounted essentials and electronics, according to Adobe's Digital Economy Index. Amazon said the two-day shopping event, held July 12 and 13, was the biggest ever globally, with members of the Prime loyalty program purchasing more than 300 million items, or 100,000 products a minute. Soaring prices of everything from food to clothes spurred consumers to take advantage of deep discounts from Ace Hardware, Walmart, Target, Best Buy, Kohls and other large retailers that piggy-backed on the Prime Day buying frenzy. In addition, retailers are also giving big discounts to get rid of the excess inventory they are sitting on after they went on buying sprees during the pandemic-supply-chain crisis to cater to shoppers flush with cash from last year's stimulus checks.
A New LEAF Fights Global Warming
Amazon, Walmart and Unilever are behind LEAF, a forest-focused carbon offset program launched in 2021. The goal is to limit deforestation and offset the carbon emissions operating their retail and distribution centers and supply chains produce. LEAF, which is directed by forest nonprofit Emergent, received a $1 billion initial investment and has also drawn financial support to date from three governments, the US, the U.K. and Norway, along with more than 20 global corporations from a range of sectors and industries.
Carbon credit or offset markets were designed with good intentions of trying to suppress the global total of emissions that are driving up damaging global warming. Using these voluntary markets, lesser-polluters could sell their carbon allowances to greater-polluters, or companies might pledge to save carbon-trapping forests to offset their own manufacturing pollution, for instance. Lack of cohesion has been a stumbling block and drawn criticism from environmental groups.
LEAF believes it can become one of the largest ever public/private efforts to end deforestation via carbon offset efforts, thanks to the backing of corporate and government partners. The world lost nearly 4 million hectares of primary tropical forest in 2021 alone, an area roughly the size of Switzerland. Ending tropical and subtropical forest loss is a crucial part of meeting global climate, biodiversity and sustainable development goals.
Reducing emissions also creates a protective gap that will play a role in stopping the spread of viral disease, including COVID-19, according to the World Health Organization. Maintaining forests helps absorb emissions and keeps a vital dividing line between manmade development and the natural world.
Video Games Can Be Good for Business
There is an ever-growing body of work showing that playing video games teaches valuable skills and can help people work better together, according to Work Place magazine. Gameplay often mirrors the kinds of interactions that help people work better together in the first place, like pursuing mutual goals, allocating shared resources, negotiating task ownership, and collaborating to solve problems. A Brigham Young University study of 80 newly formed teams found that groups that played video games together for just 45 minutes were 20% more productive than those that engaged in more traditional team-building exercises. Notably, this was true for novices and avid players alike.
Workplace gaming also offers significant community-building value. It’s been shown that positive experiences with coworkers are good for morale and that strong interpersonal connections are an important ingredient for more effective teamwork. Game scenarios often mimic common team structures where individuals each play a unique role in achieving a common goal. The article goes on to note that game-playing is also good for developing individual skills such as decision making as well as improving reaction times and other skills needed to be a successful player.
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