August marked the twenty-second consecutive month the Residential BuildFax Remodeling Index rose in its year-over-year posting, as the index saw an 8-point rise over July’s reading, to 138.6 – which is 29% higher than the August 2010 reading of 107.4.

In fact, August showed the highest level of remodeling activity since the index was launched in 2004, notes BuildFax, whose index is based on construction permits filed with local building departments nationwide and tracks the number of properties permitted. The base value of the survey’s national and regional indexes is set at 100 – a reference point pegged to the index’s launch in April 2004. The readings are based on a three-month moving average and are not seasonally adjusted, BuildFax says.

Low mortgage rates and ongoing refinancing activity have been among the key factors pushing the index higher, adds Joe Emison, vice president of research and development at BuildFax. “With remodeling activity growing at an estimated 9.5% in 2011 compared to 2010, this is one segment of the economy that is showing continued strength, even as other sectors struggle,” Emison said in a press release. 

Will the refi plan boost remodeling?

A recently announced government plan to increase refinance activity for struggling homeowners could boost remodeling activity further, or perhaps help sustain it through the winter months. The proposal actually is a version of the existing (and so far ineffective) Home Affordable Refinance Program, reworked so that it adds more homeowners to its eligibility list as long as they have jobs, good credit, and are current on their existing mortgages. The proposal specifically aims to help “underwater” homeowners refinance at lower interest rates. In most cases, mortgages must be guaranteed by Fannie Mae or Freddie Mac to be eligible. 

It is not yet clear, of course, that homeowners who owe more on their mortgage than their property is currently worth will be interested in investing money in home improvements. But freeing up cash for these homeowners – and reducing the likelihood that they’ll walk away from their homes – is expected to be a positive for the overall real estate market and the economy, particularly if the program reduces the default rate.

The regional breakdown

BuildFax reported that the West saw the biggest regional month-over-month index gain, with a 9.3%, or 11.9-point increase. That was followed by the Midwest (11.4 points; 10.8%), and the South (1 point; 1%). The Northeast saw an 8% and – or 0.6-point – decline since July, and a 3.9%, or 3-point, decline compared to August 2010. Year-over-year for August, the South was up 7.6 points, or 8.2%, the West was up 35.3 points, or  33.6%, and the Midwest climbed 11.7 points, or 11%.

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