In general, the home improvement industry has grown significantly over the past couple of years. However, the numbers tell a much more nuanced story regarding the growth, scale of competition and emerging trends within the market.
Evolving customer behaviors, online adoption, and expanding competition are just some of the factors impacting the size of the home improvement market and industry trends playing out into 2022.
USA Home Improvement by the Numbers
As you’re refining product development, marketing and distribution strategies for home improvement materials in the coming years, it can help to evaluate what’s currently happening in the industry and where opportunities and challenges exist. Here is a look at some of statistics that provide key insights into size and structure of the home improvement market:
1. Home improvement sales in the U.S. still growing
While the rate of home improvement activity is expected to slow, individuals and investors will continue to allocate funds into home repairs, updates, and remodeling. The industry raked in about $538 billion in 2021. By 2025, some groups expect home improvement sales could total more than $620 billion, though we anticipate that figure will be lower than projected. Homeowner expenditures for repairs and improvements was about $370 billion in the first quarter of 2022, but much of these funds were likely initiated in 2021 and delayed.
With more than 50 percent of the homes in the U.S. having been built before 1980, homeowners are likely to continue investing to update and repair older structures to make them functional, but lifestyle related projects may slow. We expect homeowners will still allocate funds towards extra home improvements in 2022 and over the next 5 years with eco-friendly and smart features in high demand, but nothing like the investments undertaken in 2020 and the beginning of 2021.
2. Americans like to spend money on their homes
According to data from the Bank of America, households in the U.S. spend an average of $3,000 annually for home improvement. Meanwhile, more than 20 percent of homeowners will invest between $5,000 and $15,000 for home improvement projects and products.
According to findings from our COVID Home Improvement Tracker, roughly 70 percent of survey respondents reported starting a DIY project in any given month between March 2020 and June 2021. With millennials still pursuing DIY projects, growth is expected at a rate of about 4.3 percent through 2027, compared to the 14% growth rate seen in 2020.
The response to Covid correlated with strong investments into residential projects, and this activity is expected to continue moving forward as home equity is expected to remain strong. However, consumer confidence is at its lowest in over a decade as inflation reduced purchase power.
This has been evident in the downward trend in unit sales across industry categories despite higher revenue values. Homeowners are still completing home improvement projects, but perhaps being more budget conscious and purchasing less than originally planned.
Similarly, Harvard’s Joint Center for Housing Studies is forecasting a decline in remodeling activity in 2022 as documented in their Leading Indicator of Remodeling Activity Report (LIRA).
3. Consumers want to use cash and financing for projects
When it comes to customer usage and attitudes, homeowners are increasingly hesitant to assume significant debt for home improvement projects, and almost 40 percent of DIYers in 2021 used cash savings to cover home improvement costs according to the U.S. Census Bureau. Meanwhile, the utilization of credit for remodeling projects and repairs has decreased by 30 percent. Further, according to findings from Hatch Statistics, about 75 percent of homeowners report they would prefer to pay for the work through one or more sources as opposed to taking out a loan to cover the entire project cost. Another popular option in light of high home equities nationwide, are HELOCs. In Q1 of 2022, total home equity in the U.S. increased nearly 20% to reach a record high of $27.8 Trillion, averaging $207,000 per home.
4. The Home Depot remains the largest home improvement retailer
According to analysis by Market Watch, The Home Depot possesses roughly 17 percent of the market share for home improvement retail. Lowe’s comes in second with about 12 percent market share. In 2021, Home Depot’s sales exceeded $130 billion, and Lowe’s sales totaled about $89.6 billion. However, customers at Lowe’s tend to spend more per shopping trip, at $96 compared to $83.
Since Home Depot caters more to trade professionals and Lowe’s more towards DIYers, retail sales for Lowe’s are likely to continue decreasing until consumer confidence resurges. According to the University of Michigan’s Consumer Sentiment Index, consumer confidence is currently lower than sentiments reported in 2008; with much uncertainty comes a decrease in consumer spending.
Pros are still productive and in high demand for remodeling projects despite drops in consumer confidence. The Home Depot, which is frequented more by Pros, posted Q1 of 2022 earnings that show a 3.75% quarterly revenue growth rate.
In contrast, Lowe’s Q1 2022 earnings show a 3.12% decline in their rate of home improvement retail sales. These figures corroborate the sharp decline in consumer confidence.
The Home Improvement Research Institute published similar figures in their Market Sizing and Forecast report. Contractor product sales lagged behind DIY sales in 2020, but outpaced DIY sales in 2021. Inline with low levels of consumer confidence not seen in over a decade, consumer spending on home improvement is starting to slow.
While these big players have advantages over smaller or lesser-known-brands in the retail industry, the market continues to be fairly fragmented, especially with e-commerce and online marketplaces disrupting the mix.
5. Ace Hardware has the highest customer satisfaction rating
While Lowe’s and Home Depot dominate in terms of volume, Ace Hardware has captured the highest ranking for customer satisfaction among major retailers over the past few years. In 2021, Ace had an overall satisfaction index score of 863 on a 1000-point scale, according to the 2021 J.D. Power study, which encapsulates responses from more than 2,100 consumers.
6. Home improvement service companies are seeing an increase in revenue
Companies offering home improvement services experienced an 8.5 percent increase in revenue in 2021, according to IHS Markit. This coincides with online searches for remodeling contractors and services nearly doubling from 2020 to 2021.
For example, Google searches for kitchen remodeling alone saw a 23 percent increase. However, while people do preliminary research online, businesses who connect immediately with prospective clients via email, phone call or text are able to secure sales as much as 20 times faster than their competitors.
7. The home improvement stores industry ranks seventh for retail trade in the U.S.
In terms of market size, the home improvement industry is the 48th largest in the country and the seventh highest retail trade industry, according to IBIS World. It has grown at a rate of about 5.3 percent per year since 2017, which is faster than both the retail trade sector and U.S. economy overall. The growth has been driven by private investment into residential projects and housing starts.
8. The market for home improvement retail stores grew more than 60 percent in the past decade
The current market size for home improvement stores in the U.S.—measured by revenue—is about $235,279.8 million as of February 2022. This is a roughly 63 percent increase from 2012, when the market size was about $143,547.8. According to IBIS World, the home improvement stores industry is projected to grow an additional 1.5 percent in 2022.
9. Online shopping and buying is here to stay
In 2019, only about 13 percent of U.S. adults did their shopping for home improvement products online, with most relying on in-store purchases. According to The Current State of Consumer Trust report, online shopping jumped to about 24 percent in 2021. We saw similar rates in our Home Improvement Monthly Tracker.
While brick-and-mortar establishments continue to have a high appeal, online purchase activities have remained constant over the past year. Our research also shows certain demographics such as Millennials and larger contractors are buying two to three times as much online compared to older consumers and smaller contractors.
Conducting Custom Market Size Research
While general insights in the home improvement market are helpful, it’s important to have specific data in order to define opportunities for acquisition, distribution or revenue and strategize accordingly. The Farnsworth Group offers customized market research specifically within the home improvement, building products, and lawn & garden industries. Utilize this direct feedback from end-users and suppliers to give you the detail you need.