The past few years have been a wild ride for the home improvements industry. Although there were setbacks, retailers, manufacturers, and contractors managed to overcome supply chain disruptions, rising costs, labor shortages, and the threat of temporary shutdowns. The home improvements market proved to be resilient and grew at 28 percent over a two-year span.After experiencing such explosive growth, it’s only natural towonder if the industry will continue to expand into the future.
While many homeowners took on projects themselves, professional contractors reported an 18.2 increase in sales. However, the rising cost of goods dramatically increased costs and forced consumers to dig deeper into their wallets to complete projects. One factor fueling Consumer’s desire to upgrade and stay in place is the hot housing market. The shortage of inventory has increased prices to record levels. Many homeowners have decided to remodel or make improvements to their current residences.
According to the Home Improvement Research Institute (HIRI), “This leads to a two-fold uptick for home improvement. On the one hand, home sales often lead to a flurry 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.“
HIRI Predicts Slight Dip, but Continued Growth
HIRI forecasts that consumer spending on home improvement products will dip slightly beginning in 2023. Although demand will remain high, with sales increasing 2.8 percent to $382.5 billion, several factors are anticipated to slow consumer spending through 2026. These include rising inflation, reductions in household incomes, and the number of projects consumers have already completed.
“The extreme increase in demand for home improvement products that we witnessed because of the pandemic was bound to calm sooner or later,” said HIRI Research Director Mathew Craig. While consumer spending is easing slightly on home improvement products, it is essential to emphasize that any future boost is compounded by previous unprecedented growth. The market is still performing very well.“
Significant Decline in Household incomes
Household incomes have been hit by inflation at grocery stores, gas pumps, and utilities. The decline in actual revenue has become more evident as the economic boost from stimulus payments slowly ebbs away. Research indicates disposable income climbed 2.2 percent in 2021 but declined by 3.5 percent in 2022. People who are fortunate enough to have extra disposable income are now using it towards hobbies or major purchases unrelated to DIY home improvement projects. HIRI foresee consumers initiating more contractor-led projects since they are once again willing to allow professionals to enter their homes.
Growth in Building Product Market Led by Professionals
Inflation negatively impacts the economic well-being of retailers, as well as consumers. Store owners are reluctant to make a habit of raising prices to remain profitable. However, retailers looking for solutions to issues related to long-term inflation eventually run out of options. Even in today’s economic climate, the future remains bright for independent retailers. HIRI makes the following forecasts based on segmented merchandise lines.
The annual growth rate for the top-growing lines for the consumer market between 2022 and 2026• Lawn and garden equipment and supplies: 6.1 percent• Dimensions lumber and boards: 5.1 percent• Doors and moldings: 5.0 percent• Electrical supplies: 4.8 percent• Nursery stock and soil treatment: 4.8 percent
The annual growth rate for the top-growing lines for the professional market between 2022 and 2026• Dimensional lumber and boards: 7.6 percent• Doors and molding: 7.5 percent• Plywood and related products: 7.2 percent• Siding and exterior trim: 6.4 percent• Electrical supplies: 6.3 percent• Lawn and garden equipment and supplies: 6.0 percent• Paint sundries and other supplies: 5.8 percent
The five-year forecasts provided by HIRI are designed to be a planning resource for the home improvement industry. Understanding the economic climate and future demand for specific product categories can assist retailers in budgeting, assigning staff, and projecting growth opportunities.