As remodelers prepare to say goodbye to the century’s second decade, they may be feeling a bit ambivalent about their future prospects. All in all, the last half of the present decade has been pretty good for remodelers, with annual growth figures hovering around 5 to 7% or better.
Recent indicators suggest that trend is winding down. The good news is demand for remodeling services should remain solid, but revenue growth in the next couple of years will likely be more modest.
In keeping with other industry indicators, MetroStudy announced that its Residential Remodeling Index (RRI) for the third quarter of 2019 remained more or less flat, squeaking up just a half a percentage point from the previous quarter. Although the index reached a new high of 118.9, it posted a 2.89% year-over-year gain, well below that of the previous several years. MetroStudy projects an average annual growth rate this year of 3.1% for businesses in the 380 metro areas it tracks.
Looking ahead to the start of the next decade, MetroStudy forecasts continued but leaner gains in remodeling activity in the next several years. It anticipates average year-over-year growth of 2.2% in 2020 and 2.4% in 2021, with a possible rebound in 2022.
MetroStudy chief economist Mark Boud pointed to the weak housing market, low turnover in housing, and an expected lower growth in employment in the coming years as reducing demand for remodeling services. Rising home prices as well as the cost of materials and goods, along with a shortage of skilled labor, will also create headwinds for remodelers, according to the third quarter Kitchen and Bath Market Index (KBMI), produced by the National Kitchen and Bath Association and John Burns Real Estate Consulting.
Other factors, however, are lining up in remodelers’ favor. Chief among those is demographics. Speaking with Kitchen and Bath Design News, Jay McKenzie, director of consumer insights and research at leading builder marketing firm BDX, observed, “The oldest millennials are entering their mid-30s, a key age for first-time homebuyers, and 10,000 baby boomers per day are heading into retirement.” Consequently, he foresees strong consumer demand continuing into 2020.
At present, many of those baby boomers are choosing to stay in the homes they have and are making upgrades and renovations to make them more functional and comfortable. Kitchen, bathroom and master bedroom remodels with aging-in-place features still remain priorities for these homeowners, as reflected in the National Association of Realtors’ 2019 Remodeling Impact Report.
Millennial first-time homebuyers, on the other hand, are in many cases buying homes from boomers who have decided to change their residence and want to customize them to suit their own tastes and lifestyles. Findings from the National Association of Home Builders 2019 What Home Buyers Really Want survey show millennial homebuyers place a high value on having a laundry room, home office or work space, and a more open floor plan, such as expanded kitchen for entertaining or a great room — features not present in the home when they purchase it.
Provided interest and mortgage rates remain low and home prices begin to stabilize, remodelers should see a steady stream of demand from both these constituents. Concerns about health and wellness in the home as well as money-saving utility conservation improvements cut across all generations and are other areas of opportunity for remodelers.
Another growing business for remodelers, highlighted at this year’s Home Improvement Research Institute Summit, is assisting with modifications or repairs needed due to the effects of climate change.
As both winter and summer temperatures and weather conditions become more extreme, homeowners will need to make changes to keep their homes comfortable and secure. Those whose homes have been damaged due to floods, fires, hurricanes, tornadoes, or other natural disasters will have to replace or make substantial repairs to parts of the structure.
In addition, consumers who have the means will want to update or redesign their homes to make them more pleasing and attractive. All these trends should help to drive business for remodelers.
However, should the economy and employment growth begin to slow, they may receive more requests for smaller projects with more modest budgets. The volume of demand may remain fairly constant but revenue growth probably will not keep pace with that of years past.