The latest report from the Harvard Joint Center for Housing Studies confirms the flight to the ’burbs, and sees Millennials getting in on the remodeling frenzy.
By Robert Isler
A number of trends recently detailed by NKBA in both its Market Outlook and KBMI studies were confirmed during the first part of the Remodeling Futures Conference at The Harvard Joint Center for Housing Studies — most notably, that things are looking up.
At the annual gathering, which took place virtually in March, Abby Will, Associate Project Director for Remodeling Futures, shared results of the Center’s comprehensive study on renovation and repair. She reported that full-year 2020 revenues for the home improvement/remodeling market are estimated at $420 billion — 3% ahead of 2019 despite the havoc caused by the pandemic. The number is considerably higher than what NKBA reports because it covers the entire home and grounds, not just kitchen and bath. She also noted several major trends for the year, including the unusual strength of DIY, homeowner migration from coastal to more affordable interior markets, and the beginnings of retail and office spaces converting to other uses.
Due to pandemic-related safety concerns, there was a clear focus in 2020 on exterior projects. Although those aged 55+ continue to be the largest segment for home renovation, accounting for over half the expenditures, Millennials are growing their share. Longer-term prospects are positive for the industry. Of note, despite the 2020 strength in DIY, its influence has diminished over the years. In fact, prior to 2005, 25% of home renovations involved DIY. That number shrunk to 18% in 2017, and just 15% for those aged 55+.
Turning to the economic impact of the pandemic, 4 in 10 homeowners suffered loss of income from March to December 2020. Ten percent are behind on their mortgage payments, with the number ballooning to 19% for those in lower income brackets.
Other study findings highlighted by Will included the trend toward larger homes with more multipurpose spaces to work, learn and play, as well as more features for outdoor living. She also noted a few themes that should be familiar to NKBA members, such as the growth in multigenerational households and the increased popularity of healthy home upgrades.
Other factors that point toward a positive long-term outlook for remodeling and renovation include the additional time spent at home due to more telecommuting options and housing stocks that are aging — half of all U.S. homes were 40+ years old in 2019 compared with 34% in 2009. Additionally, Will noted that due to deferred project work caused by the pandemic, 2021 looks particularly bright for kitchens, baths and room additions.
One decidedly negative factor that has fueled recent growth is the number of billion-dollar-plus losses incurred as a result of natural disasters. The old record was 17 major disasters — like hurricanes, tornadoes or wildfires — seen in both 2011 and 2017. That was surpassed last year, with 22 major disasters recorded.
Three guest speakers — Adam Kaliner, CEO of Power Home Remodeling Group; Michael Albrecht, Vice President at Lowe’s, and Jeff Winter, Vice President of Marketing for Sherwin-Williams — then shared their experiences and viewpoints on trends they see taking hold.
Kaliner spoke of shutting down his operations in mid-March 2020, with the expectation that it would reopen in two to four weeks. He noted that he had the ability to cover payroll for four weeks. The Cares Act helped, but he was forced to shut down until the end of May and furlough 2,200 employees. By July 1, the company was firing on all cylinders again, and finished the month with record sales, owing to all the backlog. He noted that he’s dealing with major inflationary price issues now.
Albrecht stressed that at Lowe’s, the theme was “safety first,” with everyone required to wear shields or masks. The company contributed more than $1 billion in COVID-19-related support. While their demand was strong and store traffic was maintained, workers couldn’t get into people’s homes. He noted that outdoor-related projects grew, but also mentioned the kitchen as a gathering place due to schooling in the home. He stated that demand is greater than ever, specifically mentioning the kitchen and bath segment.
Albrecht also said that Boomers account for more than 50% of the market for Lowe’s. Shifts he viewed as lasting include the flight from urban to suburban areas, and investments in new technology to serve the Boomer market. He spoke of discretionary vacation funds shifting to the home, and that his customers still want to use professionals for more complex kitchen remodels. He spoke of a tool Lowe’s created — My Kitchen Planner — that allows for professional virtual home measurements.
Winter noted that Sherwin-Williams has 4,400 company stores throughout the U.S. He, too, mentioned the dramatic increase in DIY over the past year. He said that he noticed the nesting trend and home-centric behavior in 2019 already, which of course, only accelerated with stay-at-home orders. He talked of the home transitioning to office, school and gym, and said that employee hiring and retention were his biggest challenges. As for trends that will stick, Winter rattled off several, including more ecommerce across the industry, more virtual walkthroughs and and more remote quotes. All have accelerated during the pandemic.
