A welcome shift toward mid-range and higher-end projects bodes well for the industry.
By Robert Isler
A strong 2021 appears to be in the cards for the kitchen and bath industry.
NKBA’s latest K&B Market Outlook projects industry spending to reach $158.6 billion for the year, a significant increase over the $136 billion for 2020. Although the new construction sector is expected to lead the way with a gain of 22%, kitchen and bath remodeling is projected to register a double-digit gain as well, up 10%. By specific room remodel, the split is similar, with $82 billion, or 52%, expected to go toward the bathroom, and $76 billion, or 48%, directed at the kitchen.
One of the most significant takeaways from the study is the expected shift from lower-end projects prevalent in 2020 to mid-range and higher-end ones this year. DIY was a big factor in softer spending last year, particularly for the kitchen. Homeowners didn’t feel comfortable having professionals in their houses, and, since they were spending so much more time at home anyway, decided to scale back and tackle some projects themselves.
As risks associated with COVID-19 are expected to diminish over the year and the need to address delayed remodels becomes more urgent, the table has been set. Additional “cautionary savings” accumulated during the pandemic provide even more fuel.
As a result, mid-range projects are expected to show gains of 18.5% for the year, a sharp reversal from a 10% loss in 2020. The high end is expected to do even better, with forecasted growth of 19.8%. Low-buck projects, although anticipated to register good gains, are forecasted to be far behind the other segments, with a gain of 9.7%. In terms of total dollars spent for the year, mid-range is expected to come in at $62 billion, high-end at $56 billion, and low-end at $40 billion. Each of the three should achieve their highest revenue levels in at least five years.
Further cause for industry optimism includes a string of positive economic indicators. As during previous recessions, the housing and home improvement sectors are expected to lead the economy back to health. Continued near-record-low mortgage rates mean that more than 70% of households are now able to afford a $200,000 mortgage. But a thorn in the side of home affordability is record low for-sale housing inventory. Fewer houses for sale, combined with strong demand because of the attractive rates, is understandably leading to significant home price appreciation. Solid home appreciation is often a precursor for jump-starting higher-end home renovations.
All in all, there are multiple encouraging indicators — with the caveat that the economy isn’t subject to any more major negative surprises.