As forecast in previous indicators, the demand for professional remodeling work recovered in the third quarter of the year. After negative growth in the first half of the year, the industry is now ready to end the year with a slight increase in growth compared to the previous year in the black.
However, it is currently uncertain whether it will be able to maintain this positive growth over the next year. Transformers are optimistic but face headwinds that could slow demand.
Robust home sales and homeowners’ desire to undertake renovations to improve their quality of life while confining themselves to their homes has led to a surge in home remodeling projects. A survey of homeowners who bought a home in the last year, conducted by the Home Improvement Research Institute (HIRI), found that 83% had done home improvement in that first year, compared to 70% in the 2018 survey among those homeowners the most frequently carried out project was a kitchen renovation (35%).
That surge in activity helped MetroStudy / Zonda’s recently released Residential Remodeling Index (RRI) see spending on large ticket remodeling up 9% year over year in the third quarter. By the end of the year, according to MetroStudy / Zonda, the number of big ticket projects (valued at $ 1,000 or more) nationally will increase by more than 8% from 2019. In the metro areas it tracks, an average growth rate of 5.7% is expected this year.
Following the same trend, the National Kitchen & Bath Association (NKBA) reported that their Kitchen & Bath Market Index (KBMI) climbed into positive territory for the first time in the third quarter of this year, posting a value of 61.9 from the low 40s in the first two quarters. Members who took the survey rated business conditions at a solid 56.5 in the third quarter, and expected demand would improve in the fourth quarter.
Overall, business in all categories increased by almost 6% compared to the previous quarter and by more than 2% compared to the previous year. Almost two-thirds of those surveyed said they did more business in the third quarter than in the previous one. The business was strongest for product manufacturers and sellers. The level of business among designers varied, but increased overall 3.2% from the second quarter. For 2020, NKBA expects annual sales growth of around 1% compared to the previous year in the divisions of its members.
Upon releasing the KBMI’s third quarter results, NKBA spokespeople were optimistic that 2021 would be a good year for their members, noting that homeowners had focused on other areas of the home, in particular, during the summer months outdoors, so would be willing to do more kitchen and bathroom renovations in the coming year. Almost a third of professionals who haven’t seen a return to normal business this year expect business to return to more normal levels in the next year.
The remodeling of the kitchen and bathroom continues to be a high priority for all investments in home improvement. In a recent homeowner survey conducted by Venetian blinds and roller blind retailer Stoneside, more than a quarter of respondents (27.7%) said a kitchen repair or remodel was one of the top projects they want to do in the coming year, with a fifth (20.7%) said it was their top priority. Almost a quarter (24.3%) named a bedroom repair or remodeling as a top project.
Still, transformers face some challenges under current business conditions, as the NKBA notes, such as disruptions in supply chains and product deliveries, skills shortages and reduced budgets. In addition, MetroStudy / Zonda is forecasting a slowdown in conversion growth in 2021 due to expectations of a slow recovery in employment, a still fragile economy and the unknown status of further government incentives. Other variables include whether home sales are starting to decline, and with the availability of a vaccine, whether homeowners resume travel and other activities that reduce the funds they have to spend on home improvement.
Based on its model, MetroStudy / Zonda expects the current growth streak in professional remodeling to end in the fourth quarter and to see quarterly growth declines in 2021, with a year-over-year decline starting in the third quarter. An increase of 0.4% is forecast for the entire year 2021. However, as this year has shown, this picture could change quickly if conditions recover faster than expected.