While the U.S market for new home construction is declining as we approach the end of 2022, the repair and remodel sector represents opportunities for growth in 2023.
Building products manufacturers and suppliers who want to keep sales and comps strong may have new market opportunities in light of the historically elevated remodeling activity in the U.S. if they’re willing to make adjustments to target repair and remodel customers more than new construction customers.
Repair and Remodel Activity Shows Growth Through 2023
During the response to Covid, the demand for new single-family home construction was a boom for the construction industry amid economic downturns elsewhere. There was a wave of families leaving metropolitan areas for the suburbs and other low-density locations. Despite strong demand, sales activity involving single-family home builds is slowing down due to continued increase in median new home values and higher mortgage rates.
While homeowners are expressing a level of uncertainty about pursuing remodeling projects in the near term, 2 in 3 still report intent to start a project in the coming weeks, according to our DIY/DIFM monthly tracker. Only 44% of homeowners have postponed a project in the past month; yet, over 60% plan to start a project in the coming weeks.
While pricing and rates are causing delays, many homeowners are moving forward with projects; committing to their homes, leveraging cash saved, borrowing against high home equity, and in some cases making compromises on what they purchase or spend.
While repair and remodeling spending may be slowing, particularly among DIY spend, it still shows signs of growth which will be driven by contractor activity on existing homes. The Harvard Joint Center for Housing Studies projects the annual owner improvement and repair spending will grow to approximately $430 billion in the second half of 2022 and reach roughly $449 billion by early 2023. While the rate of growth in repair and remodel spending may decelerate later next year, leading indicators point toward an remodeling and repair activity in line with sustainable growth.
These projections mirror the gains we’ve observed in the industry over the past several years. Despite materials shortages, pricing volatility and labor challenges, construction and design professionals—including architects, builders, landscapers, and interior designers—are confident there will continue to be growth in the home renovation industry this year, according to Houzz’s annual U.S. State of the Industry report.
A variety of factors contribute to the persistent demand, such as increasing home value; improving energy efficiency, convenience, and healthy home features; and customizing older homes to fit modern sensibilities and lifestyles. Many property owners also want to take advantage of the significant appreciation in housing prices that’s occurred over the past couple of years by making investments into their own homes to maintain and improve their home.
According to findings in The Farnsworth Contractor Index for Q2 of 2022, the majority of all contractors surveyed expected their company’s revenue to increase over the next 12 months.
Additionally, there are young families who are opting to purchase older homes and fix them up as the prices for new homes skyrocket. According to the National Association of Realtors, the median age of a home in the U.S. is 39 years. In light of the aging housing stock, there is great demand for renovations, upgrades and repairs, and there will be quite a bit of work completed by contractors and DIY homeowners alike for years to come.
Leveraging Demand for Repair and Remodel Projects
As a building materials manufacturer, retailers, and suppliers, you can capitalize on homeowner investments being made into home repair and remodeling in the U.S. One of the first steps is identifying trends in consumer and pro behaviors and how those are driving the market.
Current and prospective homeowners are being drawn toward sustainable construction and integrating smart technology throughout their houses. Here are some of the other most common upgrades and repairs being planned by homeowners in 2022:
1. Improving Indoor Air Quality
According to findings in the 2021 Healthy Home Study, prepared by The Farnsworth Group in conjunction with Harvard’s Joint Center for Housing Studies, owners and renters were primarily concerned about indoor air quality when it comes to the health and wellness of their home.
These sentiments are reflected in the home improvement projects that are top of mind for completion moving forward.
2. Energy efficient upgrades
Energy efficiency is often lacking in older structures, plus it’s a big selling point. As a result, homeowners are frequently looking at ways to improve their home’s energy efficiency, whether it be installing high-efficiency insulation, better HVAC systems, solar panels, high-efficiency windows and doors, or adding energy efficient appliances during a kitchen or bathroom remodel. Air quality and overall inhabitant health and well being are other major concerns when it comes to HVAC upgrades.
The passage of the Inflation Reduction Act will also contribute to the adoption of energy efficient appliances, building materials, and exterior features among property owners. Whereas the nonbusiness energy property tax credit had originally expired at the close of 2021, The Inflation Reduction Act renamed this existing IRC Section 25C the “Energy Efficient Home Improvement Credit” which is in effect now until 2032.
The result of the extension of this home improvement tax credit is anticipated to increase homeowner interest in tax credits for new windows, more energy efficient insulation, new roofs, air conditioners, and energy efficient appliances and therefore bolster demand for repair and remodel products and services.
3. Increasing disaster readiness
As climate-related disasters proliferate, property owners are also investing into improvement projects and repairs that address emergency preparedness. This trend may be more prevalent in markets that are specifically susceptible to disasters like wildfires, storms and flooding.
4. Accessing outdoor living
Finding a balance of indoor-outdoor living was already a priority for many homeowners, but accelerated sharply in 2021 and 2022. Homeowners are even more interested in optimizing their exterior living spaces or adding new ones, such as decks and patios, and making outdoor improvements to yards and gardens. These exterior projects cultivate demand for outdoor supplies and specific lines of paints and coatings.
5. Expanding living spaces
As the housing crisis persists throughout the U.S., there is also a drive to create more living space. Property owners are finishing basements and attics, making additions, or even building new accessory dwelling units (ADUs) on their properties.
A recent Freddie Mac study revealed that ADU construction is on the rise, growing an average of 8.6% per year over the past decade. Close to 70,000 properties sold in 2019 had ADUs (4.2% of all homes sold), compared to 8,000 in 2000. However, there is no need to build new housing on properties with existing basement units or detached garages or structures that can be converted. This trend is also creating movement among local regulatory bodies to introduce regulations and legislation that overrides policies from the post WWII era.
6. Making the work-from-home model sustainable
Many companies across industries have shifted to hybrid models or fully remote models that allow employees to split their working hours between an office and their home. As a result, families are reconfiguring and remodeling their houses in search of a more productive and comfortable home office space or even multi-use study and work spaces for multiple family members.
Reaching Customers Where They Are
When you are evaluating and prioritizing which marketing channels to invest into, consider first where the customers are conducting project and product research, as well as making purchases.
According to findings from the 2022 Building Products Customer Guide, both DIYers and trade professionals are mixing modes of product research across in-store and online options during their path to purchase.
As of our findings for 2022, building product customer behavior during product research points to about half of path to purchase touchpoints occurring online and about half occurring during in-store visits.
Researching Opportunities in the Red-Hot Repair and Remodel Sector
These are a couple of widespread trends impacting the repair and remodel sector that can guide your strategic decision-making in order to keep pace with the competition and increase sales for building products in the coming years.
However, it’s also important to conduct your own custom market research to better understand your brand health, consumer attitudes, product needs, and market size. Gathering in depth customer usage and attitude insights and brand share will help you identify opportunities for growth and inform your product development, to ensure you are targeting the right demographics within the construction industry.
The Farnsworth Group has been conducting specialized marketing research for building products companies for over 30 years. Simply, book your consultation where we will talk through ways to finesse your product marketing strategy to take advantage of opportunities in the home repair and remodel sector.