A global pandemic offers our market plenty of downswings and upswings.
By Chelsie Butler, Executive Editor, KBB magazine
To say 2020 was a challenge would be the understatement of that year. We are all hoping for an exhale in 2021 with the distribution of a new COVID-19 vaccine that can hopefully help get our lives, communities and businesses back on track. That said, although 2020 disappointed in myriad ways, it was not a failure for the remodeling and construction industries. And although it is still a tad too early to tell for sure, 2021 seems to have good things on the horizon.
“The new year is going to continue to see a robust market, and the overall pace will be strong,” said Doug King, president of the National Association of the Remodeling Industry (NARI).
Where We Stand – Then and Now
According to Robert Dietz, senior vice president & chief economist of the National Association of Home Builders (NAHB), 2020 was strong and surprising given the low points for residential construction in March and April.
“The housing market has been a bright spot for the economy; it was recently at a level of 90 on a 100-point scale in the NAHB Wells Fargo Housing Market Index – the strongest it has ever been,” he added. “But because construction has not kept pace with sales, there will be a decrease in sales in 2021 to allow construction to catch back up.”
According to King sales of existing homes will stay strong, as demand grows and often properties are on the market for less than a month.
“We also expect (and hope) that some of the folks who have been negatively impacted with shutdowns related to COVID-19 will migrate to the construction and remodeling industry, relieving some of the labor shortage,” he added.
The National Kitchen & Bath Association (NKBA) expects 2021 to be a strong year for the kitchen and bath industry – forecasting that spending to grow 17 percent overall – with 22 percent going to new construction and 10 percent to remodeling.
“This robust increase in new construction spending is being fueled by record-low interest rates and a staggering number of first-time home buyers, many of whom have moved from densely populated urban centers seeking more interior space to live, work and school from home,” said NKBA CEO Bill Darcy. “This estimate does not assume there will be double-digit growth in starts in 2021. Rather, it reflects that many of the new homes started in 2020 but delayed due to COVID-19 will be completed in 2021.”
The remodeling market has also been in a strong position, and Dietz says growth in 2021 will be steady as more existing homes are put up for resale. The Department of Commerce’s latest data on homeowner remodeling projected $214 billion for 2020, a 16 percent increase over 2019.
How COVID Has Played Its Part
As people across the country were obeying stay-in-place orders and getting to know their homes in a whole new light, the need for necessary and functional changes has kept the remodeling market on its toes. Many designers have continued some form of business as usual via virtual meetings, and, according to Darcy, many retailers beefed up their online sales capabilities.
“The vigorous housing market spurred by the pandemic is a harbinger of aggressive business for our industry,” he added. “Our third-quarter NKBA/John Burns Kitchen & Bath Market Index (KBMI) revealed that 57 percent of design firms reported that their current project pipeline now exceeds levels enjoyed during the robust days prior to the start of the pandemic. This is nearly double the 32 percent who said so in the KBMI second-quarter report.”
In terms of material prices, lumber was the big story in 2020, which Dietz says was a reflection of the strength of the housing market and the lack of domestic supply. He adds that those prices are slowly getting back to the figures in 2018 but that the housing industry needs more domestic production of lumber. This could improve with a revised softwood lumber agreement with Canada, as the tariffs the country imposes have been reduced.
“During COVID, specifiers sourced products domestically and adjusted the scopes of their projects to accommodate rising material costs and delays in the supply chain,” said Darcy, citing supply-chain disruption as the number-one industry challenge as suppliers struggle to fulfill robust demand across new construction and repair and remodeling end markets.
According to King, it is the importers who pay the tariffs, which has a negative effect on the U.S. consumer. If tariffs in China specifically go up, importers in the U.S. may look to buy those materials locally or from a different country. He said areas in which the various tropical storms hit this year will need to rebuild, and this is further increasing demand in those parts of the country.
In terms of employment, COVID has forced companies to adjust to having remote workers, which Manuel Gutierrez, consulting economist for the NKBA, says they may find it easy to adjust to.
“If they find that it doesn’t make a difference if the worker is in Oregon or India, are we going to see more jobs moving out of the country?” he added.
Dietz cites one last COVID story regarding our industry, and that is the revolving geography of the housing demand. He says part of this has been an existing trend, but part of the change is because of the impacts of the virus itself.
“The areas with the most rapid growth are the lower-density markets,” he added. “Telecommuting is a factor, with many of those people who are doing this now saying that they expect to do so in some form for the foreseeable future. As the economy reopens and a vaccine is employed all over the world, some of these obstacles will resolve themselves, but it is still a challenging environment.”
An Update on the Skilled Labor Shortage
“Many of our members say they can’t keep up with the volume of jobs coming their way, and a big reason is the lack of skilled trade professionals to do the work,” said Darcy. “But we are optimistic given this unique point in time when our industry offers real opportunities for those who have been displaced from the retail and restaurant industries through the pandemic. People need jobs and our industry has them.”
According to Ed Brady, president and CEO of the Home Builders Institute (HBI), this is an ongoing challenge, but a lot of recruitment and training programs have slowed down this year with the lack of face-to-face meetings. However, training continues with a modified approach.
“A lot of workers have been displaced – especially in the hospitality industry – which means more potential for them to enter our industry.” he added, “But we have to train those people with a skill, which requires more funding. We need to seize this opportunity.”
To improve the skilled labor shortage, HBI is talking to various stakeholders in the industry and is gaining traction with national suppliers, who Brady says all understand is in our best interest to invest in this. HBI is also expanding its corrections program so those individuals can go through training and receive a credential before they re-enter the job market.
“With the new administration and a focus on organized labor, we need to remember pre-apprenticeship is a very wide and diverse category,” continued Brady. “We need to work with Congressional leaders to approach trades training with this in mind.”
According to Darcy, the NKBA recently successfully piloted a virtual version of its Career Tours – Career Test Drive Kits – which are flexible, online simulations that offer students an interactive experience focused on the profession of K&B designer, finish carpenter and electrician, while maintaining a hands-on model.
“We hope to continue this program in 2021,” he added. “We have also strengthened our connections to online communities such as Hammr to help tell our story through our NextUp social media channels targeting kids and parents.”
King says NARI chapters are working on this across the country with different groups to attract youths to the trades. In Pinellas County, Fla., the school board is applying for a grant from the federal government that will bolster the high schools that have a more robust construction program.
“The grant will enable companies to hire teenagers as interns and teach them the remodeling business,” he explained. “NARI is also involved with Skills USA at the corporate level, and we have many chapter member volunteers who are active in various workforce development initiatives with local school districts in areas that include Milwaukee, Richmond, Va., D.C., Kansas City, Mo., Madison, Wis., and Omaha, Neb. – among many others.
According to Dietz, our industry has not been successful at recruiting women for construction work. He says three percent of the construction labor force is made up of women.
“Much of this is due to historic and cultural trends in the industry,” he added, “but given the focus on solving the skilled labor shortage across trade groups and organizations like HBI, efforts are underway to bring in new workers from all backgrounds.”
Outside of the obvious bombshell of the 2020 pandemic, our industry came across a few other surprises. King said he and his team became very busy after the slowdown in February and March. He didn’t realize they would have such a hard time obtaining permits and materials, therefore completing projects within the original scheduled time frame has become nearly impossible.
Brady has been challenged by the need for blended learning, with HBI’s curriculum at 75 percent hands on.
“We truly believe we train better students with a hands-on approach, and when we as an industry come back from this pandemic, we have to emphasize this,” he added. “But today’s training is a hybrid of online and distance learning with hands-on assessments.”
