NKBA’s 2021 Kitchen & Bath Market Outlook projects low home supply coupled with high demand will likely result in significant house-price appreciation.
By Robert Isler
Large-scale K&B renovations are set to take off in 2021, based on a series of positive drivers detailed in NKBA’s Kitchen & Bath Market Outlook.
First, existing home inventory stands at 1.53 million, down 20% year-over-year, and more than a third below the historic average of 2.37 million. At the same time, mortgage rates have been hovering near all-time lows — although recent developments suggest they will edge higher as the year progresses — which has led to increased demand. In fact, at current rates, 71% of households, or 83 million consumers, can afford a $200,000 mortgage. The combination of low supply and high demand is an ideal formula for solid price appreciation.
In fact, according to John Burns Real Estate Consulting, whom NKBA commissioned for this study, total home price appreciation from 2020 to 2023 should exceed 30%. Traditionally, one of the drivers for full-scale remodels is the understanding by homeowners that the value of their homes is steadily increasing. Add one more element to the mix — the large number of homeowners who until now put off remodeling due to the pandemic, even as their available funds grew — and the conditions are clearly present for solid growth in large- and mid-scale remodeling projects this year.
This is duly covered in the study, with expectations for both project size levels to enjoy revenue gains approaching 20% above those of 2020.
Along with the strong outlook for existing homes, the picture for new housing starts is looking positive as well. Applications to purchase a home, which had plummeted during the pandemic, rebounded by last summer to pre-COVID-19 levels. Single-family residential starts were expected to rise by 10% for full-year 2020, with an additional gain of 9% forecast for the current year.
Multifamily housing starts, however, paint a very different picture. While down a modest 3% in 2020, they are expected to plunge by 36% in 2021. This is at least partially due to the public’s loss of a taste to live in close quarters with their neighbors following the COVID-19 experience.
Turning from housing to the overall economy, according to a Wall Street Journal survey of economists, GDP should steady in 2021, resting in the 3% to 4% growth range, following the wild 30%+ gyrations seen in the second and third quarters of 2020. Even outlier forecasts call for positive economic growth for the year. As in past recessions, particularly 2002, housing and home improvement are again expected to lead the economy out.