Our clients and colleagues often ask for our view of where DIY and Contractor behaviors are headed given our firm’s dedication to capturing data-based insights on detailed customer behaviors, attitudes, and usage. This question is being raised more than ever given the results of 2020.
There are several industry fundamentals our firm monitors each month to help guide future expectations for the building products, home improvement and lawn & ranch industry. We’ll highlight only a few to provide some context for where we expect DIY and Contractor behaviors to head in the near-term.
Housing Inventory – This is a simple snapshot of supply in the ‘supply and demand’ equation. A healthy market with balanced supply and demand has roughly 6 months of housing inventory. National housing supply is very low, which means buyers don’t have many options.
Population and Household Formation – Is the demand part of the equation. Both have been strong in recent years, and in fact, there was high demand prior to COVID without adequate supply to meet that demand. 2020 added additional demand, thus creating a high amount of pent-up demand by the end of 2020.
Home Equity – Due to low supply and high demand, the value of homes continues to rise. For existing homeowners, this means having increased equity in your home. Combined with low interest rates, homeowners can borrow large amounts of equity for very low rates.
These three fundamentals are resulting in homeowners spending larger amounts on their current homes. COVID has caused homeowners to view their home differently and view their use of the space in a new way. Typically, homeowners may move to a new home to better meets their needs. However, given very limited options, high sales prices, high home equity and low borrowing rates, homeowners are spending money on their current home to re-shape it for today’s environment. This can be seen in our COVID Home Improvement Tracker, which has seen an increase in contractor’s project sizes for the past several months. In can also be seen in our Farnsworth Contractor Index which monitors residential contractor sentiment each quarter. It’s no surprise that contractor confidence has been increasing for the past four quarters.
When it comes to DIY activity, we have yet to see DIYers shift their disposable income in mass back to travel, entertainment, and hospitality. Retail sales for hardware, home improvement and landscaping show that 2021 is outperforming 1Q2020. Our COVID Home Improvement Tracker also shows that DIY project activity and project intent is as high or higher YOY.
We expect 2021 and beyond to be strong for residential professionals – from remodelers and carpenters to electricians and HVAC contractors. This strength is not only from pent-up demand, but new demand and demand for larger projects on existing homes. As our industry has heavily documented, the new housing market will also continue to be strong as it tries to meet high levels of demand in an under-supplied market.
We also expect DIY activity to remain strong, not coming to a halt even as vaccines continue to roll out. If the DIY market is flat compared to 2020, that would be excellent total product sales because 2020 was a banner year for DIY activity. We are also seeing and hearing DIYers express a change in how they view their home, and that imprint may carry forward for years to come. The result will be homeowners retrofitting their home to accommodate their evolved lifestyle.
For more information on our research and how we help clients gain deeper insights to the Pro and DIY customer, please contact us.