NKBA’s annual research on business projections has been revised to account for the effects of the COVID-19 pandemic — and while business is down, it’s not out. By Dianne M. Pogoda
When the calendar page flipped to a new decade back in January, prospects for business in the kitchen and bath design and remodeling industry looked bright. Housing markets were vibrant — always a good sign for remodeling — and the economy was humming along, a harbinger of robust activity in the kitchen and bath sector.
Then the calendar flipped to March, and the world flipped upside down. The deadly novel coronavirus, already paralyzing many parts of Asia and Europe, invaded North America, throwing the economy into a tailspin, shutting down business across the U.S. and Canada literally overnight. Millions lost their jobs, more than 100,000 in the U.S. alone perished, and projections for a rosy year ahead, with nearly 7% growth, were crushed.
To provide a comprehensive view of the U.S. residential kitchen and bath industry and evaluate the continuing impact of the pandemic on 2020 business, NKBA updated its annual market outlook survey, initially conducted before the crisis hit. Unsurprisingly, the revised research predicted a slowdown in kitchen and bath spending to $130.8 billion, an 11.7% drop from $148.1 billion spent in 2019. This will be driven by an 8.7% falloff in new construction and a 15.2% decline in remodeling.
Of the $130.8 billion, 46%, or $60.4 billion, is attributable to kitchens, with the remaining 54%, or $70.4 billion, coming from bathroom expenditures. All dollar figures reflect installed costs, including all major elements within kitchen and bath spending (plumbing fixtures, faucets, tile, vanities, countertops, lighting, showers and baths, etc.), as well as design and labor.
“Our initial 2020 Kitchen & Bath Market Outlook was conducted in late 2019, before the pandemic hit our members and homeowners in the U.S. and Canada,” said Bill Darcy, NKBA CEO. “Kitchen and bath spending had been increasing steadily prior to the pandemic at 9% in 2018 and 4% in 2019. As such, the original report projected a strong 2020, bolstered by an especially bright first quarter. While the COVID-19 crisis, unsurprisingly, led to a double-digit decline in spending across all major categories, we are already seeing signs of positive growth as shelter-in-place orders are lifted, and we’re optimistic about the industry’s long-term health.”
NKBA commissioned the highly regarded John Burns Real Estate Consulting firm, which initially helped produce the 2020 Kitchen & Bath Market Outlook, to provide an extensive update due to the impact of COVID-19. Based on new feedback from a survey of 500 consumers engaged in or planning kitchen and bath remodeling/renovation projects the research includes new sections on the pandemic’s effects on project spending and consumer behavior.
For remodeling, spending values are JBREC calculations from tabulations of U.S. Census American Housing Survey home-improvement projects microdata, NAA spending (on rental units), JBREC home-improvement estimates, and forecasts of single-family rental and owner-occupied renovation spending.
For new construction, which includes single-family and multi-family units, JBREC analyzed construction costs for spending by category within new home kitchens and bathrooms. Homes were segmented by size and price point. Due to regional differences in home price points, segmentation was conducted by nine census divisions, then rolled up.
Key Highlights
Some key points revealed by the updated research include:
- As of mid-April, 81% of kitchen and bath remodeling projects had been postponed or cancelled, but homeowners said they planned to reschedule 70% of those projects in 2020 — an encouraging sign.
- The industry is expected to face double-digit declines in both kitchen and bath spending as a result of pandemic-related disruptions to the economy and to consumer finances and behavior.
- Kitchen spending was more impacted than that of bathrooms, declining by 25% compared to 18% for master bathrooms and 14% for secondary baths.
- Similarly, medium and large projects suffered the biggest losses, with spending predicted to decrease by 22% compared to prior expectations. Spending on smaller projects is anticipated to decline by a relatively milder 14%.
- For projects that continued through the pandemic, designers were less likely to be used, at a rate of 25% compared to 38% pre-COVID-19.
- Homeowners who continued with remodeling projects during the pandemic lockdown did so at lower price-points, and were more likely to use do-it-yourself (DIY) labor.
Positives and Negatives
Consumers cited a number of reasons for delaying or cancelling projects during the crisis. Among these, they pointed to fewer resources; fear of outsiders coming into their homes; limited access to industry professionals; store and showroom closures; reduced income, and fear of job loss as hurdles to home improvement.
More than one in four homeowners (28 percent) cited limited finances as an impact of COVID-19 on remodeling plans.
At the same time, however, there were bright spots for the K&B industry. For starters, consumers spending more time at home are realizing the projects they want to tackle. They also have, more free time; expenditures are decreasing in other areas, like vacations; there’s a greater opportunity for DIY work, and a renewed focus on home projects.
Show Me the Money
More than six in ten homeowners (64 percent) still use cash from savings to finance a kitchen or bath remodeling project. Active projects in mid-April were more likely to be paid by credit card (19%) compared to deferred projects (13%), and deferred projects were far more likely to be financed with a home equity loan (11%, compared to 2% of active projects).
The kitchen and bath market tends to recover more quickly than other indicators in times of economic uncertainty, and it is intimately tied to the housing market. A strong housing market often leads to healthy remodeling growth, and applications to purchase a home are once again on the rise after a major decline at the start of the COVID-19 crisis. Applications are still below pre-pandemic levels, but with mortgage rates 1% lower than they were in 2019, there are positive signs for consumer spending ahead.
New Thinking
Nearly one-third (31%) of Americans say the pandemic has changed the way they use or think about their kitchen or bath, particularly with an increasing focus on sanitation, quality, function and design. That number increases to 38% when at least one member of the household is working from home. When asked if they wanted to undertake renovation work in their kitchen or bath in response to the pandemic, 19% of households with at least one member working from home said yes, while 16% of all households and 11% of those in which no one works from home agreed.
This Market Outlook Update contains data on numerous other segments, including spending by product categories, budgets, motivations and obstacles, spending by budget size, age of home and much more. To obtain a copy of the report, visit store.nkba.org and click on NKBA Research Reports. NKBA members are eligible to receive this report free. To request a copy of the 2020 Kitchen & Bath Market Outlook: Q1 Update, please contact the Member Relations team at 1-(800)-THE-NKBA.
