When faced with a flat market, as is currently the case for the home improvement industry in 2026, it can be more challenging for stakeholders, from manufacturers and retailers to contractors and distributors, to know how to achieve growth.
Faced with inflation, budgetary concerns, and stagnant levels of disposable income, many consumers are tightening their wallets and postponing unnecessary home improvement activity. Meanwhile, a smaller segment of higher-income households is still spending freely.
In a recent webinar from the Home Improvement Research Institute (HIRI), Executive Director Dave King provided an update on the latest trends, market conditions, and research shaping the industry. He gave a comprehensive analysis of the dynamics currently at play, several of which are beyond control for manufacturers, retailers, and other stakeholders. He also dug into how brands can still increase market share heading into the final quarter of the year.
Nominal growth is currently hiding a real decline in the market. While the overall home improvement market is projected to have a compound annual growth rate (CAGR) of 2.6% in 2026, the forecast shows it contracting by roughly 1.4% when inflation is taken into account, based on data from HIRI’s U.S. Size of the U.S. Home Improvement Market Forecast from June 2026. In particular, the professional market is expected to decline by about -3.4% in real terms, owing to the scope and size of the projects they’re typically completing, and the products required for those activities. Looking ahead, real growth returns in 2027 at about 2% and holds at about 2.2% real CAGR from 2026 to 2030. As Dave explains, the data is provided at a product-category level, and the inflation is tied specifically to building products and materials. This is important to examine what is transpiring within the particular building products space, and how that relates to the broader industry.
A flat market is a share market. This means that, since not an actual expansion in the market that is lifting up the industry as a whole, achieving growth as an individual company relies on capturing a greater portion of the flat market through strategic choices. HIRI members have access to the full U.S. Size of Market Report, which is updated on a quarterly basis. The report calculates the total market size of the home improvement products market in the U.S. and forecasts likely spend over the next five years.
The income group that homeowners are in significantly impacts how they are adjusting to the higher cost of living in almost every sector and to experiencing higher uncertainty. As Dave shared in the webinar, participation in home improvement activities fell to 38% in Q2 2026, down from 53% at the end of 2025, based on findings from HIRI's Quarterly Homeowner Project Activity Tracker for Q2 2026. Among households that make less than $80K annually, participation fell to 31.7% compared to 46.2% for households in the $160K-plus bracket.
There have been small shifts in spending among all income levels, but the lower-income segment is showing the most significant difference. As things become more expensive, more lower-income households are dropping out of completing projects altogether. Additionally, the number of DIY hours spent on home improvement projects have been climbing over the past couple of quarters:
Among households that actually completed a project, spending is separated heavily by income, based on data from HIRI’s Q2 2026 U.S. Homeowner Project Activity Tracker. The average spending among project doers for the previous quarter was:
Gen X and younger generations make up the majority of project spending. Additionally, we are seeing a shift in spending based on demographics. A roughly 56% share of spend came from Gen X and younger generations in 2023 (the latest available data), which up from 38% in 2015, according to HIRI's analysis of data from the American Housing Survey, sponsored by the Department of Housing and Urban Development (HUD) and conducted by the U.S. Census Bureau. On the flip side, the Baby Boomers’ share of spending is on decline.
The industry is experiencing a variety of challenging dynamics, with economic factors that are outside of the control of manufacturers and retailers. As a result, projects have become notably more expensive to complete, and this is impacting everyone. Here are a few takeaways from Dave’s analysis in the Home Improvement Industry and Recent Research Update webinar from August 2026 to help brands identify growth opportunities, develop effective strategies, and make informed business decisions in an evolving industry landscape:
Recent metrics related to consumer sentiment and disposable income reveal the state of uncertainty and caution that is affecting homeowners. In July 2026, the University of Michigan’s consumer sentiment index declined to 55.2, which is among the lowest reading ever recorded. Consumer sentiment is important and ranks third among predictors of building product spent, but it’s also somewhat temporary. It typically has a one-quarter impact. When analyzing this predictor, it’s the difference in sentiment—whether it’s going up or down—that often matters more than the absolute value.
Meanwhile, disposable income is a greater predictor of home improvement spending in the long term, as it can move the overarching trend. Before the U.S. with Iran started in February 2026, real disposable income was projected grow about 3.2%, based on findings from HIRI’s forecast last September. As the war lingers on, contributing to inflation and a higher cost of living, the expected growth rate has been revised down to 0.5% for the year.
When groceries, fuel, and healthcare all cost more, and wages do not keep pace, the money for a project is simply not there, regardless of demand. Households, as well as the businesses that serve them, continue to spend, but they’re prioritizing needs first and deferring on wants. This is why there continues to be healthy activity when it comes to repair, replace and maintenance work, and also why recovery in the industry is likely just deferred, not foregone.
Given the variety of economic dynamics that affect the home improvement industry, there are generally four reasons why accounts go quiet, as Dave explains in the webinar. Briefly, these reasons include:
Three of the four reasons why accounts go quiet are about demand. The fourth is about completion. It’s important to identify what reasons seem most prevalent for your company so you can implement the appropriate response. For example, if you’re experiencing softening demand, but you treat it like the third cause (the order went elsewhere), you risk discounting an account you were never losing. If your customers are finding it harder to finish the work for a variety of reasons, but you approach it as softening demand, you will find yourself waiting out something that will not resolve on its own.
In a flat market, it is vital to be proactive and investigate what is causing certain accounts to go accounts, which could be a combination of factors, so you can have the right response.
With budgetary concerns prevalent, it may seem like the logical solution to turn to discounts and promotions to help carry your business through this dip in the market. However, discounting is the weakest lever you have. About 72% of consumers say that promotions have a limited influence on their product selections, while only 15% claim it has a strong influence. First, one product is a low percentage of the overall cost. Additionally, the average project cycle, from ideation to completion, is approximately 15 months. If homeowners have been making the decision to embark on a project over the course of a year, then discounted products aren’t likely to hold meaningful sway.
Another factor to consider is that the home improvement work that is most common right now is work that cannot wait. The median age of U.S housing stock is 44 years, and as it continues aging, home improvement spending shifts away from the projects a household can choose to postpone and toward the ones that keep a home safe and functioning. That’s especially true for lower-income households. Approximately 74% of their improvement spending is going toward maintenance, replacement and disaster repair against 55% for higher-income owners.
According to data from HIRI’s Quarterly Contractor Business Sentiment Tracker for Q2 2026, about 60% of contractors reported a cancelled or delayed projects, the highest rate since contractor tracking began in Q1 2024. On projects already underway, homeowner indecision is still the largest challenge contractors name at 40%, ahead of timely payment at 32% and cost constraints at 25%. But it has fallen notably in the past year (down from 49% in Q2 2025). Two things moved the other way:
Additionally, what customers say they buy is expertise, quality and a job that finishes when it was promised. For example, when customers hire a professional, their main reasons include:
There’s a similar effect when it comes to restarting stalled projects. Brands that focus on addressing uncertainty and offering support, rather than using a temporary discount, are more likely to come out ahead. Here is how that might look for different players in the industry:
For a more in-depth update on the latest trends, market conditions, and research shaping the home improvement industry, check out Dave’s entire presentation in the Home Improvement Industry and Recent Research Update webinar from August.
While this webinar is free to the public, HIRI members have access to other exclusive webinars, as well as a wealth of research studies and actionable insights needed to stay ahead of industry change.
While the overall building products market is projected to have a compound annual growth rate (CAGR) of 2.6% in 2026, the forecast shows it contracting by roughly 1.4% when inflation is taken into account, based on data from HIRI’s U.S. Size of the U.S. Home Improvement Market Forecast from June 2026. The professional market is expected to have greater negative growth than the consumer segment. Looking ahead, real growth returns in 2027 at about 2% and holds at about 2.2% real CAGR from 2026 to 2030.
There are numerous economic factors leading to a contraction in the home improvement market and decline in households participating in projects. In particular, consumer sentiment, which ranks third among predictors of building product spent, recently declined to its lowest reading ever recorded. Additionally, disposable income levels are not growing significantly, especially in light of high inflation and increasing cost of living. These factors are causing uncertainty and affecting the market, as participation in home improvement activities fell to 38% in Q2 2026, down from 53% at the end of 2025, based on findings from HIRI's Quarterly Homeowner Project Activity Tracker for Q2 2026.
With budgetary concerns prevalent, brands that focus on addressing uncertainty and offering support, rather than using a temporary discount, are more likely to come out ahead in a flat market. The median age of U.S housing stock is 44 years, and as it continues aging, home improvement spending shifts away from the projects a household can choose to postpone and toward the ones that keep a home safe and functioning. When it comes to hiring professional contractors or making product selections, customers are willing to invest in return for expertise, quality and a job that finishes when it was promised.