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Remodeling Market Sentiment Remains Stable in Third Quarter Despite Headwinds – Eye On

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In the third quarter of 2026, the NAHB Remodeling Market Index (RMI) posted a reading of 62, up one point compared to the previous quarter. The RMI has remained within a narrow band between 59 and 70 for the past four years. Remodeler sentiment remains the standout sector within the housing industry, when compared to its single-family and multifamily counterparts.

Despite sentiment remaining stable, remodelers report that economic uncertainty is making some potential customers hesitant to move forward with projects. Labor shortages, exacerbated by immigration enforcement and competition from data center construction, are extending the time it takes to complete projects. Nevertheless, remodeling is gaining share in the overall construction market, as it is somewhat less sensitive than new construction to the current elevated interest rates. NAHB’s projection for remodeling activity will remain stable in 2026 and grow slightly in 2027, which is consistent with today’s reading.

The RMI is based on a survey that asks remodelers to rate various aspects of the residential remodeling market “good”, “fair” or “poor.” Responses from each question are converted to an index that lies on a scale from 0 to 100. An index number above 50 indicates a higher proportion of respondents view conditions as good rather than poor.

Current Conditions

The Remodeling Market Index (RMI) is an average of two major component indices: the Current Conditions Index and the Future Indicators Index. 

The Current Conditions Index is an average of three components: the current market for large remodeling projects ($50,000 or more), moderately-sized projects ($20,000 to $49,999), and small projects (under $20,000).

In the third quarter of 2026, the Current Conditions Index averaged 70, which remained unchanged for the third consecutive quarter. The component measuring large remodeling projects increased two points to 66, while the small projects component inched down one point to 73, and the moderately-sized projects component decreased two points to 71.

Future Indicators

The Future Indicators Index is an average of two components: the current rate at which leads and inquiries are coming in, and the current backlog of remodeling projects. 

In the third quarter of 2026, the Future Indicators Index averaged 54, up two points from the previous quarter. Both the component measuring backlog of remodeling jobs and the current rate at which leads and inquiries increased two points to 56 and 53, respectively, for the quarter.

For the full set of RMI tables, including regional indices and a complete history for each RMI component, please visit NAHB’s RMI web page.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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AI Exposure Remains Relatively Low Across Most Construction Occupations – Eye On Housing

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Artificial intelligence (AI) is rapidly changing how work gets done, but its impact varies considerably across occupations. For most construction occupations, near-term exposure to AI remains relatively low. An NAHB analysis of U.S. Bureau of Labor Statistics (BLS) data finds that 45 of 47 selected construction-related occupations—or about 96%—are classified as having “low” or “moderate” relative AI exposure. Only two occupations are classified as having “high” exposure, and none are classified as “very high”. These findings suggest that although AI is likely to change how construction work is performed, its current iteration has a less direct impact on many of the industry’s frontline occupations.

The chart compares relative AI exposure with projected employment growth from 2025 to 2035, illustrating that greater AI exposure does not necessarily correspond to faster or slower employment growth. Among construction occupations, construction managers and construction and building inspectors are the only two classified as having high relative AI exposure. Employment for these occupations is projected to grow 9% and remain essentially unchanged, respectively, from 2025 to 2035. By contrast, employment for solar photovoltaic installers, classified as having moderate exposure, is projected to grow 37%, making it the fastest-growing construction occupation in the group.

Among the selected construction occupations, the low-exposure group includes many hands-on trades and field roles, such as carpenters, construction laborers, roofers, and operating engineers. These jobs rely heavily on physical execution, changing jobsite conditions, safety judgment, coordination with other trades, and interaction with materials and equipment. These characteristics limit the direct reach of current software-based AI into many of the tasks performed in these roles. By contrast, construction managers and construction and building inspectors are classified as high-exposure exceptions, reflecting the greater role of planning, documentation, scheduling, compliance, reporting, and communication in these occupations. This distinction is consistent with findings from NAHB’s Housing Market Index (HMI) special questions, which show that builders primarily use AI for information-intensive tasks such as advertising and marketing, project planning, and project design. These findings complement the occupation-level AI exposure classifications, highlighting the greater applicability of AI to information-intensive functions than to hands-on construction activities.

Relatively low current AI exposure does not mean that construction is insulated from technological change. Instead, AI adoption may initially augment existing work through faster estimating and planning, improved document management, safety analysis, progress monitoring, and decision support. Changes to field operations may emerge more gradually through AI-enabled equipment, robotics, and computer vision. Recent findings from NAHB’s Housing Market Index (HMI) special questions show that builders identified technological advances as a positive long-term force for the housing industry.

Source:

U.S. Bureau of Labor Statistics, Employment Projections Program, “AI Exposure Categories and Employment Projections, 2025–35,” with definitions and limitations documented in the workbook’s Field Descriptions tab.

The BLS supplemental table, AI Exposure Categories and Employment Projections, 2025–35, combines five publicly available data sources to compare detailed occupations based on their theoretical and observed exposure to AI. The measure indicates whether AI technology could be, or has been, used to assist with or complete some tasks performed in an occupation. Importantly, it does not predict job losses, automation, productivity gains, or wage effects. This analysis focuses on 47 SOC construction occupations, excluding extraction occupations, plus construction managers. It does not represent the full workforce employed by construction firms, which also includes adjacent occupations such as architects, engineers, cost estimators, accountants, sales professionals, technology staff, and administrators. In addition, occupations are counted regardless of the industry in which workers are employed.



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PCE Inflation Remains Elevated – Eye On Housing

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The Federal Reserve’s preferred inflation gauge remained elevated in August, complicating the Fed’s path to its 2% target. Core PCE held at 3.0% year-over-year for the third consecutive month. Though the reading came in lower than expected, it’s not necessarily a sign of disinflation. The Bureau of Economic Analysis updated the PCE deflator methodology to better reflect household spending patterns, which likely trimmed the year-over-year increase. The revisions were applied retroactively through the first quarter of 2021. Meanwhile, the personal saving rate dropped to the lowest level in nearly four years, as persistent inflation offset wage growth while consumer spending accelerated.

The headline Personal Consumption Expenditure (PCE) Price Index increased 3.4% in August from a year ago, unchanged from last month, according to the Bureau of Economic Analysis. The “core” PCE price index, which excludes food and energy, rose 3.0% over the past twelve months, the same increase as last month. Core PCE has remained at or above 3.0% since the start of the Iran conflict, suggesting inflation pressure persists even excluding volatile energy prices.

Consumer spending rose 0.9% in August, and real spending, adjusted to remove inflation, increased 0.6%, the largest monthly increase since March 2025.

Meanwhile, personal income rose 0.2% in August. This growth was led by increases in compensation and government social benefits. Real disposable income—income adjusted for taxes and inflation—was unchanged. On a year-over-year basis, personal income was 4.3% higher, and real (inflation-adjusted) disposable income was up 1.3%.

With spending growth outpacing income growth, the personal saving rate fell to 4.1% in August, the lowest level since November 2022. The personal saving rate has been on a downward trend since the start of this year, with the exception of July.



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Single-Family Permitting Declines Through July as Multifamily Activity Remains Stronger –

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Single-family permitting activity continued to weaken through the first seven months of 2026, while multifamily permitting remained stronger compared with the same period last year. Although single-family permits declined in most regions and states, multifamily permitting increased in three of the four regions, led by significant gains in the Northeast and West.

Over the first seven months of the year, the number of single-family permits issued nationwide reached 546,826. Compared with the same period in 2025, this represents a 3.3 percent decline from the July 2025 total of 565,208. In contrast, multifamily permitting activity remained stronger, with 304,876 permits issued nationwide, marking a 6.3 percent increase compared with the same period last year.

Regionally, year-to-date single-family permitting declined in three out of the four regions through July. The Midwest was essentially flat, with a 1.1 percent increase. The South declined 2.6 percent, the West fell 6.1 percent, and the Northeast posted the largest decline, at 9.6 percent. Multifamily permits increased in three of the four regions, led by the Northeast (39.9 percent), followed by the West (16.2 percent), and the Midwest (4.1 percent). The South was the only region to post a decline, with multifamily permits falling 6.5 percent, driven largely by reduced permitting activity in major metropolitan areas across the region.

At the state level, 20 states and the District of Columbia recorded increases in single-family permits compared with the same period last year, with gains ranging from 69.6 percent in the District of Columbia to 0.3 percent in Louisiana. The remaining 30 states posted declines. Nevada recorded the steepest decline, with single-family permits falling 27.5 percent.

The ten states issued the highest number of single-family permits accounted for 62.5 percent of all single-family permits issued nationwide. Texas led the nation with 87,795 permits issued through July 2026, although this represented a 3.1 percent decline from the same period in 2025. Florida, the second-highest state, recorded a 2.8 percent decline, while North Carolina, ranking third, posted a 7.7 percent decrease.

Through July, 30 states and the District of Columbia recorded increases in multifamily building permits, while 19 states experienced declines. Alaska remained unchanged. The District of Columbia posted the largest percentage increase, with multifamily permits rising 108.9 percent, from 541 to 1,130 units. In contrast, Nevada recorded the steepest decline, with permits falling 42.0 percent, from 3,916 to 2,271 units.

The ten states issued the highest number of multifamily permits accounted for 61.0 percent of all multifamily permits issued nationwide. Through the first seven months of 2026, Texas, which issued the largest number of multifamily permits, posted a 20.5 percent decline compared with the same period last year. California, the second-highest state, recorded a 25.9 percent increase, while Florida, ranking third, saw multifamily permits decrease by 31.2 percent.

At the local level, the following are the ten metropolitan areas with the highest number of single-family permits issued.

Below are the ten metropolitan areas with the highest levels of multifamily permitting activity.



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PCE Inflation Remains Sticky – Eye On Housing

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The latest report shows the Federal Reserve’s preferred inflation gauge remains sticky in July, complicating the Fed’s path to its long-term 2% target. Meanwhile, consumer spending remains resilient but is showing signs of slowing, with real consumer spending unchanged in July. Households are pulling back on spending amid persistent inflation.

The headline Personal Consumption Expenditure (PCE) Price Index increased 3.7% in July from a year ago, unchanged from last month, according to the Commerce Department’s Bureau of Economic Analysis. The “core” PCE price index, which excludes food and energy, rose 3.3% over the past twelve months. Core PCE has held at 3.3% since the start of the Iran conflict, with the exception of a three-year high of 3.5% in May. This suggests inflation pressure persists even as energy prices slightly eased.

With elevated inflation, consumer spending slowed as the cushion from larger tax refunds faded. Consumer spending rose 0.2% in July, and real spending, adjusted to remove inflation, remained flat.

Meanwhile, personal income rose 0.4% in July. This growth was led by increases in compensation, government social benefits, and personal income receipts on assets. Real disposable income—income adjusted for taxes and inflation—was up 0.4% in July. On a year-over-year basis, personal income was 3.7% higher, and real (inflation-adjusted) disposable income was up 0.5%.

With income growth outpacing spending growth, the personal saving rate edged up to 3.0% in July, the highest level since April. This marks the first monthly increase since January.



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Remodeling Market Sentiment Remains in Positive Territory in Second Quarter – Eye On Housing

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In the second quarter of 2026, the NAHB Remodeling Market Index (RMI) posted a reading of 61, down one point compared to the previous quarter. The RMI has remained in the low 60s consistently over the past year.

Even with this slight decline from the previous quarter, remodeler sentiment remains the standout sector within the housing industry, outperforming both its single-family and multifamily counterparts.  

With current mortgage rates above the median outstanding rate for existing homeowners, the incentive to remodel instead of purchasing a new home given the low levels of existing inventory persists due to this lock-in effect. Additionally, homeowners are sitting on record high real estate asset gains which they are able to tap into making it easier to fund remodeling projects. However, ongoing economic uncertainty and current cost pressures due to inflation are causing project delays, especially for larger ones. In the latest RMI survey, 74% of remodelers reported that their suppliers have increased prices of materials since March due to higher fuel costs, with the average increase in materials prices over that span being 6.7%. 

Nevertheless, based on the positive sentiment from the RMI and structural demand tailwinds, NAHB’s forecast for remodeling spending remains robust both in the short-term and over the long run.

The RMI is based on a survey that asks remodelers to rate various aspects of the residential remodeling market “good”, “fair” or “poor.” Responses from each question are converted to an index that lies on a scale from 0 to 100. An index number above 50 indicates a higher proportion of respondents view conditions as good rather than poor.

Current Conditions

The Remodeling Market Index (RMI) is an average of two major component indices: the Current Conditions Index and the Future Indicators Index. 

The Current Conditions Index is an average of three components: the current market for large remodeling projects ($50,000 or more), moderately-sized projects ($20,000 to $49,999), and small projects (under $20,000).

In the second quarter of 2026, the Current Conditions Index averaged 70, unchanged from the previous quarter. The component measuring moderately-sized remodeling projects increased four points to 73, while the small projects component remained unchanged at 74 and the large projects component decreased three points to 64. 

Future Indicators

The Future Indicators Index is an average of two components: the current rate at which leads and inquiries are coming in, and the current backlog of remodeling projects.

In the second quarter of 2026, the Future Indicators Index averaged 52, down two points from the previous quarter. Both components decreased quarter-over-quarter but still remain above the break-even point of 50. The component measuring backlog of remodeling jobs was down two points to 54, while the component measuring the current rate at which leads and inquiries are coming in edged down one point to 51.

For the full set of RMI tables, including regional indices and a complete history for each RMI component, please visit NAHB’s RMI web page.



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Builder Sentiment Remains Weak Amid Affordability Concerns – Eye On Housing

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Builder sentiment remains subdued as rising material costs, elevated mortgage rates and ongoing affordability challenges continue to strain the housing market.

Builder confidence in the market for newly built single-family homes fell two points to 35 in June, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the 14th straight month that sentiment has remained below 40, a streak not seen since 2011-2012 during the foreclosure crisis.

Costly and inefficient regulatory policy is clearly impeding the ability of builders to increase the housing supply. According to a new NAHB study, government regulation, taxes, fees and other costs add more than 26% to the price of an average single-family home. Easing permitting bottlenecks, density limits and inefficient zoning rules would help reduce costs and support the housing growth the nation needs.

The latest HMI survey also revealed that 35% of builders cut prices in June, up from 32% in May. The average price reduction was 6% in June, the same rate as the previous month. The use of sales incentives was 62% in June, up slightly from 61% in May, and marking the 15th consecutive month this share has reached 60% or higher.

Derived from a monthly survey that NAHB has been conducting for more than 40 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions fell two points to 38 in June, the index measuring future sales held steady at 45 and the index charting traffic of prospective buyers remained unchanged at 25.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 44, the Midwest held constant at 43, the South fell two points to 33 and the West dropped one point to 27. The HMI tables can be found at nahb.org/hmi.

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U.S. Labor Market Remains Resilient in May – Eye On Housing

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Despite rising inflation and ongoing economic uncertainty, the U.S. labor market remained resilient in May. Nonfarm payrolls increased for the third consecutive month, and the unemployment rate held steady at 4.3%. Job gains were concentrated in leisure and hospitality, local government, and health care, while financial activities experienced a decline in payroll employment.

Wage growth moderated in May, with average hourly earnings rising 3.4% year-over-year. This pace is 0.5 percentage points lower than a year ago. Importantly, wage growth has been outpacing inflation for nearly two years, which typically occurs as productivity increases.

National Employment

According to the Employment Situation Summary reported by the Bureau of Labor Statistics (BLS), total nonfarm payroll employment increased by 172,000 in May, following an upwardly revised gain of 179,000 jobs in April. This marked the third consecutive month of job gains following a period of volatile payroll growth.

Employment gains for the previous two months were revised higher. The monthly change in total nonfarm payroll employment for March was revised upward by 29,000 from +185,000 to +214,000, while the change for April was revised upward by 64,000 from +115,000 to +179,000. Combined, these revisions added 93,000 more jobs than previously reported.

Job growth in early 2026 has improved notably compared with 2025 but has yet to fully match the pace observed in 2024. Through May, monthly payroll gains have averaged 114,000, compared with 10,000 per month in 2025 and 122,000 per month in 2024.

The unemployment rate remained unchanged at 4.3% in May. Over the month, the number of persons unemployed declined by 66,000, while the number of persons employed rose by 149,000.

Meanwhile, the labor force participation rate—the proportion of the population either looking for a job or already holding a job—remained unchanged at 61.8%. This marks the lowest level since November 2021 and remains below its pre-pandemic level of 63.3% recorded at the beginning of 2020. Among prime working-age individuals (aged 25 to 54), the participation rate rose 0.1 percentage points to 83.9%.

Job gains in May were slightly more broad-based than in recent months. Employment increased by 70,000 in leisure and hospitality, 55,000 in local government, and 35,000 in health care. In contrast, employment in financial activities declined by 22,000 and has fallen by 107,000 since its recent peak in May 2025. Federal government employment, which experienced a sharp decline last fall, increased modestly by 1,000 jobs in May.

Construction Employment

Employment in the overall construction sector rose by 17,000 jobs in May, following a gain of 9,000 in April. Within the industry, residential construction added 900 jobs, while non-residential construction added 15,700 jobs.

Residential construction employment now stands at 3.3 million in May, including 925,000 workers employed by builders and remodelers and nearly 2.4 million residential specialty trade contractors.

Despite the monthly gain, residential construction employment continues to show signs of weakness. The six-month moving average of job gains for residential construction remains negative, reflecting an average monthly loss of 1,300 jobs and declines in three of the past six months. Meanwhile, over the last 12 months, residential construction has shed a net of 33,300 jobs, marking the fifteenth consecutive annual decline and the longest stretch of annual losses since the Great Recession. However, residential construction has gained 1,303,900 positions from its post-Great Recession low.

Meanwhile, the unemployment rate for construction workers rose to 5.2% in May on a seasonally adjusted basis, though it remains relatively low compared with historical norms.



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Mortgage Rates Increase Further as Inflation Remains Elevated – Eye On Housing

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Mortgage rates continued to increase in May as inflation accelerated. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.41% in May, up 7 basis points (bps) over April. Since the conflict in the Middle East began, the 30-year mortgage rate has increased by 36 basis points. The average 15-year rate averaged 5.76% in May, up 7 bps from April, and up 33 basis points since the end of February. Even so, both rates remain lower than a year ago by 41 bps and 19 bps, respectively.

The 10-year Treasury yield, a key benchmark for long-term borrowing, averaged 4.47% in May, 16 bps higher than the previous month. Stronger-than-expected inflation pushed yields upward, with the 10-year yield reaching as high as 4.6% during the month. Rising energy prices kept inflation high, as fuel oil prices increased 5.8% and gasoline prices rose 5.4%.

Persistently high inflation has also strained household budgets. As people used more of their disposable income or drew down on savings to cover everyday expenses, the personal saving rate fell to 2.6% in April. The rate was the lowest since June 2022 when CPI was at its peak.



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Rent Prices Continue to Rise, While Absorption Remains Low – Eye On Housing

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The percentage of new apartment units that were absorbed within three months after completion was up one percentage point in the fourth quarter, according to the Census Bureau’s latest release of the Survey of Market Absorption of New Multifamily Units (SOMA). The survey covers new units in multifamily residential buildings with five or more units. The number of new multifamily units completed was 77,380 in the fourth quarter, the lowest quarterly completions since the second quarter of 2022 (76,630).

Apartments

The percentage of apartments absorbed within three months after completion was 49% for those completed in the fourth quarter of 2025. This was the sixth consecutive quarter for which new apartments were absorbed at a rate below 50%. The median asking rent for apartments completed in the fourth quarter was $2,034, up 4.5% from $1,946 last year. This also marks the first quarter where the median asking rent topped $2,000.

Along with the three-month absorption rate and completions, SOMA also reports absorption rates at six, nine, and twelve months after completion. For apartments completed six months ago (97,210 units), 68% have been absorbed into the market. For apartments completed (93,140 units) nine months ago, 80% have been absorbed. For those completed twelve months ago (92,760 units), 90% have been absorbed into the multifamily market.

Condominiums and Cooperative Units

The three-month absorption rate for new condominiums and cooperative units rose to 70%. Total completions of new condominiums and cooperative units, according to SOMA, was 4,831 in the fourth quarter of 2025.



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