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Pandemic-Sparked Projects Drive Remodeling Growth
The pandemic has sparked growth in projects like outdoor living spaces, healthy home solutions and home offices, while longer-term, natural disasters like the West Coast fires will likely continue to drive remodeling growth. That was the consensus of three industry experts who spoke about what’s driving the home improvement market at the Home Improvement Research Institute’s Virtual Summit, held in early October.
The panel discussion, which brought together Houzz Vice President of Industry Marketing Liza Hausman, Home Advisor Chief Economist Mischa Fisher and Harvard Joint Center for Housing Studies Kermit Baker, looked at both positive and negative influences on the market, along with projections and opportunities for remodeling going forward.
Baker noted that negative growth factors – such as the pandemic-driven recession, an aging demographic that traditionally spends less on home improvement than their smaller, younger cohorts, and a millennial audience that’s been slow to form households and buy homes – are largely being offset by positive factors, such as higher home prices that give homeowners more equity to work with, a solid upturn in housing starts, aging housing stock that requires updating and new opportunities due to increased interest in smart home technology, aging-in-place and healthy home updates.
Hausman believes that consumers, who have spent unprecedented amounts of time in their homes since the pandemic, are looking at their environments with a more critical eye. “Because people are home, we’re seeing incremental activity that wasn’t necessarily going to happen, or happen in the near turn,” she said, adding, “there’s also the pull forward – people knew they wanted to do [projects] but now that they’re home, they have time to do the research and make the calls. Part of the reason we’re seeing people move ahead with projects is they’re not commuting and their time isn’t being spent on those things, so they have more time to focus on that project.”
Fisher also cited the “stimulus effect,” explaining that, “[With the low interest rates, many people have] refinanced, and that’s additional spending power that you suddenly have at your disposal that you were already spending on your home, so you don’t even have to switch that out to something else. We also have a scarcity of options to spend it on in terms of travel and restaurants and other common discretionary things. People already in their homes have seen an equity boost due to the spike in prices, and I think these will all serve as tailwinds for the broader remodeling market next year.”
The biggest challenge, according to Fisher, is the supply chain issue: “Things just aren’t there,” he said, adding that the labor shortage, already a problem, was made more acute in many regions as, for health and safety reasons, some tradespeople chose not to work. Supply chain disruptions also continue to slow the completion of jobs.
However, he expects to see positive remodeling growth over the next two years based on permit numbers and starts in new construction.
Baker is also bullish about the future. He noted, “I’m very optimistic, I think the industry has performed really surprisingly well – once we got through March and April, we saw a strong rebound, and I think that’s going to continue. But I think we all need to think about how the industry is going to be different in the future. Homes are now people’s offices, their schools, their restaurants, their gyms, their movie theaters, and I think some of that will stay. We’ve seen growth in multi-generational homes, and I think the second home market will be strong moving forward as people decide, ‘I might want to stay in the city sometimes but I might want a place to go to that’s a little more isolated.’”
He also noted that while the housing market is very strong, the commercial market is very weak. “[With] retail, offices, hotels, demand is way down, there’s already talk of a lot of that space being vacated, a lot of bankruptcies and all that, so what’s going to happen to that space? We’ve had a housing shortage for the last decade, it’s fair to think that some of that commercial space is going to be repurposed for residential space. And I think that’s a tremendous opportunity.”
As far as other trends moving forward, Hausman cited “a slight trend away from globalization,” explaining, that “even before the pandemic, the U.S. was trying to bring more manufacturing home, we’ve had the trade wars with China, the UK has left the EU, and I think the pandemic added to this shift with pressures on the supply chain and more people saying what can I do, what can I get closer to home? And it’s not a huge dramatic shift that we’re talking about, but I think there are going to be manufacturers [asking themselves], ‘what is going to be the safe route to be able to protect my supply chain?’
“On the homeowners’ side, they’re already making changes in terms of their lifestyle priorities: going more suburban from urban, working from home, [focusing on] expanded living spaces, indoor and outdoor, and I think we’re going to see a lot of that nesting still stick [after the pandemic eases]. With contractors, we’re seeing more adopting of new technology, more remote work, less reliance on in person and paper, more [being done] in the cloud and rethinking their supply chains as well, [along with] more overall pent up demand for projects.”