Remodeling activity held up well during the third quarter of 2007, according to the National Association of Home Builder's (NAHB) Remodeling Market Index (RMI). The current market conditions indicator increased slightly to 46.2 from 44.8 in the second quarter. And the future expectations measure comes in at 43.3, down just slightly from 44.6. Comparisons to third quarter 2006 (current market conditions: 47.8; future expectations: 45.4) show only a slight decline.

"Buoyed by continuing strong demand for minor additions and alterations, the remodeling market is expected to end the year in pretty good shape," said NAHB Remodelers Chairman Mike Nagel, CGR, CAPS, a remodeler from Chicago. "Though down a bit from the previous quarter, the remodeling market is not experiencing the dip in production and sales being seen by the new home building sector of the industry."

The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view the market conditions as improving. The RMI has been running slightly below 50 since the final quarter of 2005.

Nationally, minor additions and alterations increased significantly during the third quarter to 47.07 (from 43.27), while major additions and alterations remained stable at 46.89 (from 46.36). Regionally, minor additions and alterations increased significantly in the northeast to 56.68 (from 50.43) and Midwest to 57.44 (from 45.06).

The amount of work committed for the next three months rose slightly to 36.12 (from 35.91) and the backlog of remodeling jobs decreased to 44.93 (from 47.33). Additionally, owner-occupied remodeling increased to 49.1 (from 47.1), while renter-occupied remodeling declined to 38.7 (from 40.2).

"The RMI is consistent with our forecasts for the remodeling market," said NAHB Chief Economist David Seiders. "We expect activity to contract in 2008, but to resume positive growth in 2009 and beyond."

The RMI "special questions" section this quarter focused on outdoor remodeling jobs, which is the first time questions have been asked on this topic. Fifty-two percent of respondents reported the most common type of outdoor remodeling job completed by the company was adding a deck, followed by porch (35 percent), patio (25 percent), front porch (25 percent), decking/patio covers/enclosures (22 percent), outdoor lighting (13 percent), and outdoor kitchen (13 percent).

Thirty-one percent of respondents reported an increase in outdoor remodeling work compared to the previous year. And 44 percent responded that outdoor remodeling work had increased during the last five years. Respondents said that sixty-two percent of customers financed outdoor remodeling projects with cash, with thirty-six percent using an equity line of credit. The U.S. Census reported $2.5 billion was spent last year on decks. It appears that customers tend to hire remodelers to add decks onto homes after living in the house for a period of time.