The current economic situation is putting a strain on individuals and industries across the United States, which has a direct impact in the housing market and for the manufacturing sector. In order to prepare adequately for what that means in 2026 and beyond, building products and home improvement manufacturers must gain insight into emerging market trends and the current attitudes and behaviors of customers - both DIYers and Pro.
That will enable your product development, channel, and marketing teams to plan accordingly and make adjustments to account for primary industry drivers.
What to Include in Your 2026 Strategy
As your internal teams strategize about product development, marketing efforts, and channel selections for the upcoming year, our team at The Farnsworth Group recommends you make the following measures a priority:
- Understanding current demand - who is buying, how, where, why
- Updating your merchandising strategy amid ongoing price sensitivity
- Focusing on nurturing brand loyalty
Let's dig deeper into why these three focuses should be core to your go-to-market strategy and the efforts of your teams.
1. Understand Where Demand is Coming From in 2025 and 2026
A significant portion of demand is coming from maintenance and repair activities on existing housing stock in 2024 and leading into 2025, and all indicators continue to point towards repair-and-remodel driving building product sales in 2026 as well.
The current market conditions are still facing a degree of uncertainty such that depending on your product category and customer you may hear a range of views and predictions. Spend enough time, and you'll likely hear various housing market commentators support conflicting cases using similar data.
So, what should you trust? We look at various market fundamentals, and from those fundamentals, our position has been, and remains, that the existing home market and contractor segment represents opportunity for growth given low home inventory, high home value, home equity, reduced mobility, and a median home age 40+ years. Not to mention the DIY market having exhausted itself during the pandemic years. Though there is high demand for new single-family homes, starts are restricted due to land costs, high material costs, high labor costs and low labor pool, along with stubbornly high mortgage rates driving down affordability.
This has paved the way for increased remodeling activities. With more homeowners staying put and substantial equity in their homes from large home value gains from 2020 to today, individuals will continue to turn to contractors and home improvement professionals to complete larger renovation projects to make their home compatible with their evolving lifestyle and what they desire for the next phase of their life.
The existing supply of resale homes is still only about a four-month supply, constant compared to one year ago based on data from the U.S. Census Bureau and the National Association of Realtors, but higher than the 2-3 month lows experienced for much of 2023 and 2024. Compare that against a balanced market of 6 months supply.
In contrast, the supply of new homes has increased to an eight-month supply. However, unlike existing homeowners, new home builders are positioned and movitivated to provide incentives to reduce inventory levels.
In contrast to the last couple of years, overall existing home sales have been down.
The Housing Affordability Index—which measures whether a typical family earns enough to qualify for a mortgage, remains at the lowest levels seen for the past 20 years, according to the NAR. Because affordability is low, and with the decline in consumer confidence from Jan-Apr 2025, housing stock is not moving as it was in 2020 and 2021. With the 10-year treasury remaining high, this is keeping mortgage rates above 6%, keeping new home affordability under pressure. Fed Funds Rate, is also remaining higher for longer, which is has a greater impact on existing homes. According to Census American Housing Study Data, the larger the remodel, the more likely homeowners will leverage home equity as a funding vehicle. However, it's important to note that even then over 80% of larger projects ($50k+) are funded without a home loan or line of credit.
Looking towards 2026, this dynamic may change ever so slightly, with some small basis point decreases rolled out iteratively by the Fed. As a result of these inflation-cooling measures, the pool of available home buyers is also anticipated to remain tight until the cost of debt declines and more individuals and families are able to qualify for a mortgage.
Don’t Stop Investing in Understanding Your Customers
The worst kind of scenario you face is losing market share because of a lack of information, which leads to taking the wrong actions, and losing relevance among your customer base. Remember, it can take decades to recover market share that was lost over just a year or two, so tread carefully.
As you compete in 2025 and 2026, you want to make sure your dollars are well spent, and that means investing them in specific activities based on reliable data and insights. You need to hear directly from your customers about which media channels they are using to conduct project and product research specific to your category during their path to purchase.
Use the information you have gathered that sheds light on customer usage, attitudes, and path to purchase behaviors to prepare your product planning, distribution strategy, marketing communications, and media investments for 2026. Know who to target, what to say to them, where to say it, and when to say it.
Also, understand that, as they have been for over a year now, consumers are still suffering a lack of confidence because of uncertainty regarding the economy, high mortgage rates, and the cost of home improvement materials among other cost-of-living increases. What you communicate and how based on what is impacting their behaviors in the current environment is critical for maintaining and gaining share in competitive markets.
Qualitative and quantitative customer usage and attitude (U&A) research will provide you with this information. We recommend you first lean into qualitative research to understand more deeply what is influencing customer behaviors, especially as market conditions are shifting. This should be followed with Quantitative research to validate finding and provide statistical relevance of various activities.
2. Update Your Merchandising Strategy
A strong merchandising strategy is made up of three primary components: What you should make, where you should sell it, and how you should price it.
Throughout 2021 and 2022, many manufacturers kept up a steady cadence of price increases without causing damage to unit sales due to high demand and limited avialability. Throughout 2023 and 2024, many manufacturers’ unit sales declined and they have been holding pricing steady due to supply chain pressures preventing them from meeting end-customer needs for lower materials prices.
Generally speaking, the manufacturers that were able address availability constraints, while reducing internal costs to stabilize retail prices were able to increase market share. A key reason for this is the current budget constraints of homeowners and their reduced confidence. This market reality is expected to continue throughout 2025.
Consumer confidence declined dramatically to start 2025, to levels not seen decades. Lower confidence often results in lower spending among consumers when it comes to investing in remodeling or home buying. Confidence, and therefore increased pricing sensitivity, is being driven by inflation (everything costs more) and uncertainty on a variety of fronts such as fears of recession.
"When conducting strategic planning for 2026, your teams need to continue evaluating internal pricing strategies and create appealing product mixes of good, better, best options at different price points. This breadth of SKUs will ensure your customers who are industry professionals have a wider variety of options as they face budget-sensitive customers." - Grant Farnsworth, President of the The Farnsworth Group
We've heard over and over again during market research studies these past couple of years that homeowners and contractors alike made changes to product, project, brand, or supplier because of pricing pressures. That $100K remodeling project became a $75K project because of rising costs to borrow money and inflationary pressures on budgets. Homeowners have continued citing the cost as the biggest challenge with their home improvement, maintenance or repair project, much more than other challenges, such as project timelines, finding a contractor, or product knowledge.
We've tracked this concept since 2023 and have continued to track this in the Quarterly Homeowner Activity Tracker. What we found is that intent to complete home improvement projects costing less than $5,000 has remained strong quarter over quarter despite lower consumer confidence. This makes sense given that repair and maintenance projects are driving a large share of building material sales currently.
Many homeowners (perhaps those not in the luxury market) are having to make concessions and that is putting contractors on their back foot to really focus on cutting material costs or provide options to win the project bid and keep their businesses running at a decent profit margin.
Additionally, customers are looking for options that are “good enough” to get the job done, and they may be more hesitant to splurge on the “best” option available to them without having a compelling reason to do so. Look at your Product Development pipeline. Make sure you understand which features are critical, versus which are value-add features that can command a premium.
Your next move should be to provide SKUs that cover your bases from good, to better, and best at varying price points. Use custom market research on your unique customer base to find out directly from them what they value and how much by letting that data inform your merchandising and pricing practices in 2025 and 2026.
Once you have these data-based insights, use them to your advantage in product line reviews. Suppliers are demanding more and more that you be the category captain and come to any review armed with information to support your case for increased shelf space, or a reason to promote your brand over another.
One other note: Focus your sales forecasts on unit sales rather than dollars to benchmark your performance metrics.
3. Work to Reduce Brand Switching Among Customers, Especially Pros
Competition normalized in 2024 and has remained constant throughout 2025. Expect to continue to see this more traditional, competitive environment where you must maintain your customer base despite ongoing levels of brand switching behaviors among pros and homeowners through 2026 as well.
In August 2023, about 40 percent of contractors tried a new product for the first time, and roughly 30 percent tried a new brand or manufacturer for the first time. Additionally, about 24 percent reported that the rising costs of home improvement materials and products led them to purchase a cheaper brand or product, and about 23 percent also purchased less than planned.
In 2022 and 2023, you may not have felt the impact of brand switching to your revenue because there was a high increase in total demand. However, that tuned changed in 2024. The good news is that remodeling activity is still happening and is forecasted to rebound.
Different product categories are expected to grow at different rates. For specifics on your product category, we recommend you become a member of The Home Improvement Research Institute (HIRI), which makes product category specific size of market forecasts available to its members multiple times per year. Learn more >>
Your Product and Channel teams should be working to refine your SKU mix to cover good, better, and best options to help prevent your homeowner and Pro customers from switching brands and making it more logical for them to remain loyal to your brand within their project’s budget constraints.
To this end, your Brand and Marketing teams should be working to understand your Brand Health. This is feedback from product buyers that provides your organization with critical metrics on brand awareness, consideration, use and perceptions. By tracking your Brand Health over time, you’ll be equipped with insights needed to know where you must focus in the sales funnel, and what changes may be needed to drive loyalty. This may be marketing spend, media allocation, product placement or event product satisfaction.
What are the Next Steps for Your Teams to Prepare for 2026?
To keep products moving this year and next, building products, home improvement, and lawn & garden companies will have to compete for market share and present a strong value proposition to more price sensitive customers.
If you are plagued with questions about what’s going on in the mind of your customers, how your brand health is fairing, and what kinds of markets you should be targeting to achieve YoY company growth, our research team at The Farnsworth Group can help.
For more than 30 years, manufacturers and suppliers in the building products, home improvement, and lawn & garden industries have trusted our primary research team to gain deep insights in their customers’ behaviors, their go-to market strategy opportunities/risks, and their overall market presence.
