While home improvement sales may dip slightly, it should be a banner year. Retailers, contractors, and other professionals are reaping the benefits of a housing bubble that will take time to resolve. In 2021, the demand for home improvement products and services was at record levels since more people opted to renovate their current homes instead of purchasing a new one.
At Harvard’s Joint Center for Housing Studies, Abbe Will projects spending will grow 17 percent.
“So, anything above 5 percent is strong growth. And then certainly when we’re in the 10 and 15 and 20 percent range, that’s incredibly strong growth, “she said. Will believes the growth will peak this year.
The increase in building material sales at retail outlets is one indicator contributing to an expanding market that will exceed $320 billion by 2023.
- Estimates value products alone at $120 billion
- Sales increased for hardware retailers in 2020 and 2021 because consumers focused on improving the interior and exterior living spaces
- While online shopping reached record levels, physical home improvement stores experienced unprecedented sales from in-store shoppers
The Lasting Impact of Covid
Covid has played a role in consumer behavior. As the housing stock ages and millennial homeowners’ buying power gradually displaces that of boomers, remodeling becomes a choice and necessity. Rising mortgage rates and the appreciation of home values are unpredictable outcomes of a health and economic crisis that has slowly subsided in the past few months.
- 12 percent of home remodels were canceled in 2020; many have been reinstated in 2022
- 22 percent of homeowners did unplanned remodels as a result of Covid
- Large projects such as kitchen and bath were up 15 percent in 2021
Tight Market Causes Housing Prices to Soar
According to the Home Improvement Research Institute, the home improvement industry grew 13 percent in 2021, expanding a total of 28 percent from 2020 until the close of last year. “It’s no shock that the housing is red-hot right now. Even with increased home prices, there has yet to be an increase in home inventory, indicating that there’s still room for the market to grow. This leads to a two-fold uptick for home improvement. On one hand, home sales often lead to flurries of project activity as purchasers rush to make their new house a home. On the other hand, it results in homeowners getting priced out of the market and reinvesting in their current homes with renovations.”
Supply Chain Disruptions to Continue into 2023
While consumers are eager to hire professionals or take on projects themselves, delays caused by disruptions in the supply chain continue to be a significant issue. A recent US Remodeler Index (USRI) survey asked remodelers about the state of the industry. Twenty-five percent of respondents have postponed projects or adjusted the project’s scope to maintain margins. The owner of one firm said, “We are taking on fewer jobs with higher total revenue, so we aren’t spread too thin.“
- Severe product delays are remodelers #1 concern
- Disruptions in the supply chain expected to last into 2023
- Product and labor shortages compound schedule issues
- 47 percent of remodelers say 50 percent of their projects are behind schedule
Aging Housing Stock Increases Need for RepairsIn a conversation with Marketplace, Grant Farnsworth, president of the Farnsworth Group, a home improvement research firm, points to years of underbuilding homes after the crash in the mid-2000s as a contributing factor to the situation the housing market is in today. Citing the inability to meet the demand for new housing quickly, Farnsworth notes the average owner-occupied home is 40 years old. “The older the home, the more need, true need, there is to do projects such as windows, efficiency-related projects, and roofing.”
There are always unknown variables such as rising interest rates, market volatility, and economic downturns that can impact the home improvement industry. Still, at this point, independent retailers can anticipate a good year.