Resiliency of Home Improvement A Perfect Storm of Favorable Factors

Resiliency of Home Improvement: A Perfect Storm of Favorable Factors

Aug 21, 2023

Home improve­ment is poised to main­tain its robust momen­tum fol­low­ing a small stint of nor­mal­ized to neu­tral growth, buoyed by a con­ver­gence of com­pelling fac­tors that under­pin this endur­ing trend. At the fore­front of this surge is the his­toric lev­els of equi­ty that home­own­ers cur­rent­ly enjoy. This new­found finan­cial sta­bil­i­ty empow­ers home­own­ers to embark on projects that enhance the com­fort, safe­ty and val­ue of their abodes. From HIRI’s Q2 2023 project activ­i­ty report, we see 2 quar­ters of growth fol­low­ing a low in Q4 of 2022.

Q22023 HIRI Quarterly Home Improvement Activity Tracker Completed and Planned Projects
Data From HIR­I’s Q2 2023 Quar­ter­ly Home Improve­ment Activ­i­ty Tracker

Com­ple­ment­ing this equi­ty is his­tor­i­cal­ly low unem­ploy­ment rate and above aver­age wage growth. At face val­ue, this sim­ply con­tributes to infla­tion­ary pres­sures as house­holds are will­ing to spend more to get what they want. As we dive deep­er, it is clear that his­tor­i­cal­ly low unem­ploy­ment is actu­al­ly con­tribut­ing sig­nif­i­cant­ly to the sta­bil­i­ty of the hous­ing and home improve­ment sec­tors.

The US is esti­mat­ed to have rough­ly 5 mil­lion few­er homes than it needs and there is no skilled labor solu­tion in sight to address this. Giv­en the large con­tri­bu­tion of hous­ing-asso­ci­at­ed costs to infla­tion, the Fed has a tremen­dous chal­lenge of solv­ing for infla­tion with­out being able to fun­da­men­tal­ly address the root cause of the issue: too few homes for those want­i­ng to own them.

It is unlike­ly that we’ll see any sort of cor­rec­tion” occur­ring in the hous­ing or home improve­ment space. Respon­si­ble lend­ing of the last few years will help ensure that those embark­ing on home improve­ment ven­tures are well-posi­tioned to under­take these projects, rein­forc­ing the aver­age growth we’ve seen over the last 10 years.

FHFA_Percent First Lien Q1 2023
Source: FHFA Per­cent of Closed-End, First Lien Mort­gages Out­stand­ing By Inter­est Rate

In tan­dem with the finan­cial back­drop, the con­sumer’s wal­let tells a sto­ry of its own. While dis­cre­tionary income and sav­ings rates have dipped from their his­toric highs, they remain opti­mal­ly posi­tioned to fuel con­tin­ued home improve­ment expen­di­tures. Home­own­ers, armed with the con­fi­dence of equi­ty and guid­ed by a desire to remod­el-in-place rather than buy a new home that con­tains their upgrades, will fur­ther sus­tain home improve­ment spend. 

FRED Homeowner's Equity Over Time
Source: Board of Gov­er­nors of the Fed­er­al Reserve Sys­tem (US)

In this era where the home has emerged as an all-encom­pass­ing sanc­tu­ary, the pur­suit of home improve­ment is more than just an eco­nom­ic activ­i­ty — it’s a man­i­fes­ta­tion of the desire for com­fort, safe­ty, func­tion­al­i­ty, and per­son­al expres­sion. As the eco­nom­ic land­scape evolves, one thing remains clear: the tra­jec­to­ry of home improve­ment con­tin­ues to point upwards, dri­ven by the winds of finan­cial pru­dence and the aspi­ra­tion for an ever-enhanced dwelling.

Stay on Top of Changes in Customer Sentiments and Home Improvement Behaviors

The Home Improve­ment Research Insti­tute will con­tin­ue to relay Home­own­er and Pro cus­tomer sen­ti­ments through var­i­ous month­ly, quar­ter­ly, and annu­al research and report­ing. Don’t just skim the high­lights — join HIRI for instant access to the full data sets in order to mea­sure indus­try wide sen­ti­ments and spend­ing behav­iors in com­par­i­son to your com­pa­ny’s inter­nal figures.

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The hous­ing and home improve­ment mar­ket con­tin­ues to change rapidly.

If your brand is to stay rel­e­vant to Pros and DIY­ers while main­tain­ing and gain­ing mar­ket share, you and your team must keep your minds sharp to cur­rent indus­try trends and cus­tomer behaviors.

HIRI’s Home Improve­ment Insights Sum­mit is the pre­mier event deliv­er­ing the lat­est insights into con­sumer and pro cus­tomers atti­tudes, dis­tri­b­u­tion chan­nel shares, and hous­ing macroeconomics.

You’ll be hear­ing from experts in the indus­try who will be bring­ing to you research-based guid­ance for under­stand­ing mar­ket dri­vers, fore­see­ing changes, and dri­ving prod­uct and ser­vice strat­e­gy and innovation.

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