Demand forecasting is an important part of staying competitive in almost any line of business, and the building products industry is no exception.
Analyzing various demand drivers in different market segments enables you to shift business strategies and resources to work towards maximized sales.
Although not a perfect practice, demand forecasting will give you a leg up when it comes to your product development and marketing efforts. And the more robust, relevant and refined market research you use for tracking drivers and demand forecasting, the more accurate your sales projections will be.
Demand forecasting isn’t so much about calculating the current market demand for a particular product as it is about analyzing individual demand drivers in order to make educated predictions about what will happen in the future.
There are numerous factors that impact the home improvement industry — both for DIY homeowners and professionals. These factors also influence what types of products will be sought after, where, by whom and what features and traits buyers are likely to prioritize when deciding to make purchases.
Here are eight of the most impactful demand drivers to account for in accurate demand forecasting for home improvement products and building materials:
An overall understanding of the current U.S. National Housing Supply is essential to understanding your product category’s demand drivers because of the correlation between supply and demand. An understanding of the U.S. housing supply can be generated by analyzing
New Existing Home Listings
Existing Home Sales
New Building Permits Issued
New Building Completes
The current state of the real estate market and other development trends in an area will influence demand for certain building materials. If there is a high volume of commercial or residential construction growth taking place, professionals will be kept busy with upcoming projects, driving demand for building products and materials. Additionally, pay attention to specific housing trends, such as trends in sustainable housing, hyper-local neighborhoods, and simplified living.
Homeowner mobility is an understanding of the feasibility and willingness of homeowners to move. An increase in homeowner mobility is often associated with an increase in existing housing supply, while a decrease in homeowner mobility often shrinks supply, putting pressures on the supply and demand equilibrium.
HIRI’s Monthly Economic & Industry Update centralizes data from the U.S. Census Bureau, Fannie Mae, FRED, HUD, The Conference Board, and the National Association of Realtors regarding homeowner mobility, including:
Homeownership Rate (see page 15)
Consumer Confidence Index (see page 18)
Existing Home Sales (see page 28)
Housing Affordability Index (see page 30)
Home Purchase Sentiment Index (see page 31)
Pending Home Sales Index (see page 37)
Especially when taken in tandem with an understanding of homeowner mobility, factoring in the age of the housing stock serves to add color to the probable state of the home’s maintenance and repair needs.
Similarly, if the available housing inventory in an area is older, you can project that the homeowner demographic will be needing upgrades. Whether they are DIYers or apt to afford & prefer to to hire professionals for remodels and renovations is another factor that will influence demand forecasting for your home improvement products, depending on if your brand holds greater share of wallet among DIYers, Pros, or a mix of both.
Another demand driver to consider as a manufacturer or retailer in the home improvement industry is the different consumer income levels among your target demographics. Individuals with more expendable income can invest more frequently and heavily in home remodeling projects.
Societal influxes of cash on hand in 2020 and 2021 created strong tailwinds for home improvement spend growth
Also available to members in HIRI’s Monthly Economic & Industry Update are figures and analysis pertaining to consumers
Real Disposable Personal Income (see page 8)
Retail Sales (see pages 9 – 10)
Unemployment Rate and Jobs Added (see page 11)
As available cash on hand changes, reprioritization of certain home improvement projects tends to occur, both as cash on hand increases and as cash on hand decreases.
Data from HIRI’s 2023 Monthly Home Improvement Tracker, in partnership with The Farnsworth Group, provides insight into homeowners current methods of funding home improvement and repair projects.
Consistently, the top response is existing cash/savings followed by credit cards.
Beyond economic metrics and customer sentiments, inclement weather and natural disasters can impact demand and should be accounted for as possible in your demand forecasting.
In certain regions, weather events are a normal occurrence. For example, in places that are prone to storms and high winds, individuals have to invest more in roof repairs and maintenance simply out of necessity. In areas with ample year-round sunshine, landscaping and gardening products and services stay in demand longer.
Infrastructure stimulus bills, or the lack thereof, are another example. This type of legislation translates into funding that impacts the availability of projects and spending capacity, particularly for construction professionals. States or regions that are investing in infrastructure will likely witness a greater amount of building activity in the future, which would drive demand for products.
Further, changes to zoning policies and building codes impacts how developers, architects, and builders make decisions about where to build, what to build, and with what materials to build.
Demand for specific products will vary depending on the needs, lifestyles and common experiences of homeowners in a certain geographic region. Some areas are known for incorporating a certain style or look for both residential and commercial buildings. Regionally, there are differences in popular landscaping styles, for example, or there can be a widespread use of brick facades vs. cedar siding. Sometimes, these types of features are even regulated by city ordinances or homeowners’ associations (HOAs).
It’s beneficial to know what, if any, defining characteristics exist within regions and markets where your organization is active.
Understanding regional differences in demand and supply for various building products, based on regional factors and varying regional psychographics, will enhance your marketing, sales, and channel team’s ability to speak to the hearts and minds of the modern consumer and the modern Pro customer.
Additionally, the current events and national movements that impact social norms is an example of a current event that had ripple effects on every aspect of life, including the construction industry. Demand for touchless technology and automation proliferated. Individuals became increasingly concerned about indoor air quality (IAQ) and other healthy home features. Events or occurrences such as that — whether nationwide or contained to a single state or region — will continue to play a role in driving demand for building product purchases.
For building materials manufacturers and retailers, demand forecasting involves projecting what the competitive environment will look like in the short and long term. That includes demand among professionals, as well as homeowners who purchase home improvement products for DIY projects.
In order to make these projections, home improvement organizations look to data surrounding key drivers of demand in the home improvement industry and customer segments specifically. (And as you know, much of this information is hard to come by for home improvement products!)
Demand forecasting gives you insight into the market and lets you plan accordingly. Your team will be better positioned to make decisions about where to focus and invest resources. Additionally, you can apply the data at various stages of the product development process and to determine where you should direct your teams’ efforts.
It’s important to note that demand drivers shouldn’t be analyzed in a vacuum. Multiple drivers can come into play, alongside other factors, such as where your company has an established presence, your distribution channels, and your primary competition.
There are various forecasting models you can use that take into account a multitude of relevant factors related to demand for construction materials and equipment. Your company can then track and monitor those demand drivers that have a direct influence on your business, which will give you a clearer picture when projecting sales and identifying opportunities.
As a result, your company can dynamically adjust your investment, product development, and marketing strategies based on data-driven predictions.
One of the keys to successful demand forecasting is having access to the right data. The Home Improvement Research Institute offers a wide array of industry research and insights that is available to members on demand. This data can be used to help your company make relatively accurate and valuable forecasts about consumer demand in the building products market.
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