By Robert Isler
Although the economy has seen better days, there are a number of remodeling drivers currently in place that support a second straight year of double-digit K&B growth. According to the July release of the 2022 Kitchen & Bath Market Outlook, the final one for the year, the industry should grow by 16 percent this year, a relatively modest pullback from the initial forecast of 19 percent. Let’s take a look at some of the factors causing this resilience.
Low rate locks
The majority of homeowners took advantage of the recent period of unprecedented low rates that came to a close late last year. As a result, 73 percent have locked in to rates below 4 percent, with 34 percent of them sitting on fixed-rate mortgages below 3 percent. Most consider it a no-brainer to stay put and invest in a meaningful upgrade rather than chase a new home at today’s prices and rates.
Nearly 3 in 4 mortgage holders are locked in at rates under 4 percent, a motivation to remodel rather than buy.
Record homeowner equity
At $315,000 per average household, homeowner equity is at record levels and has increased by over 40 percent since 2019. That wealth effect is another reason homeowners are not only continuing to remodel, but favoring larger projects.
Favorable housing stock
Homes between the ages of 20 and 39 years are considered to be prime prospects for a remodel. The number of U.S. homes within that range remained fairly constant at around 22 million for the 6-7 years through 2021. However, it is projected to steadily rise for the next few years, reaching 25.2 million by 2025. That’s an additional 2.7 million homes entering the remodel sweet spot which can help soften the effects of any economic downturn. In fact. middle-aged homes in prime remodel years have between 15 percent and 24 percent more remodels than the U.S. norm.
Resumption of paused projects
Partly due to the remnants of the pandemic and partly due to the unusually long delays in securing product – particularly cabinets and appliances – many homeowners decided to postpone projects until conditions improved. Recent signs point to a resumption of those projects.
Together, these factors will serve as a buffer if the current economic downturn does morph into a recession. An upcoming blog will examine how the kitchen and bath industry has fared during previous recessions.