The Home Improvement Industry Year in Review: 3 Takeaways from 2021

2020 was a year rife with heartache, tur­moil, and dis­rup­tion at a glob­al lev­el. How­ev­er, despite the COVID-19 pan­dem­ic (or per­haps, because of it), demand and sales for home improve­ment prod­ucts increased. The result was explo­sive growth for the home improve­ment cat­e­go­ry through­out 2020 – 13.3% to be exact. How­ev­er, as the page turned into the new year of 2021, many with­in the indus­try pro­ceed­ed with caution. 

Like most things around the begin­ning of 2021, the out­look for the home improve­ment mar­ket was uncer­tain. With the suc­cess of 2020 in the rearview, most could not fath­om anoth­er year of such unprece­dent­ed growth. How­ev­er, look­ing back at the past year, it is clear that 2020 was just the begin­ning. Accord­ing to pre­lim­i­nary esti­mates for 2021, the indus­try grew anoth­er 13% for the entire year. To put that into per­spec­tive, the home improve­ment prod­uct indus­try will have increased by 28% over a two-year span, a feat near­ly unheard of in an indus­try already quite large and established. 

So, what did we learn from this year of excep­tion­al growth? Here are HIRI’s top three high­lights from the home improve­ment indus­try in 2021:

1. While 2020 growth was driven largely by consumers, 2021 proved to be the year for the professional. 

Accord­ing to Liza Haus­man, Vice Pres­i­dent of Indus­try Mar­ket­ing at Houzz, more than half of home­own­ers took on projects them­selves in 2020. How­ev­er, as most of these improve­ments wound toward com­ple­tion and peo­ple became more com­fort­able with the idea of hav­ing oth­ers in their home, the demand for pro­fes­sion­al con­trac­tors increased rapid­ly. In fact, pro­fes­sion­al con­trac­tors report­ed an esti­mat­ed 18.2% increase in prod­uct sales in 2021. 

2. Intense growth in demand was not met without setbacks, including shortages in supply and labor, and ultimately inflation. 

While the strong demand for home improve­ment was wel­comed whole­heart­ed­ly among the indus­try, the last­ing impacts of the pan­dem­ic are still present and real. Sup­ply con­straints have plagued many with­in the indus­try as man­u­fac­tur­ers strug­gle to keep up with demand. Although the root caus­es of con­straints are var­ied (com­po­nent short­ages, ship­ping delays, lack of labor, etc.), the out­come is the same: infla­tion. When tak­ing infla­tion into account the ​“real” indus­try growth is clos­er to 5%, com­pared to the 13% nom­i­nal growth seen overall.

3. The housing market will continue to have a large impact on home improvement activity.

It’s no shock that hous­ing is red-hot right now. Even with increased home prices, there has yet to be an increase in home inven­to­ry, indi­cat­ing that there is still room for the mar­ket to grow. This leads to a two-fold uptick for home improve­ment. On one hand, home sales often lead to flur­ries of project activ­i­ty as pur­chasers rush to make their new house a home. On the oth­er hand, it results in home­own­ers get­ting priced out of the mar­ket and rein­vest­ing in their cur­rent homes with renovations. 

As we move into the new year, it is impos­si­ble to pre­dict what is to come, not only for the home improve­ment indus­try but the glob­al mar­ket as well. How­ev­er, sol­id fun­da­men­tals, con­tin­ued demand, and lin­ger­ing tail­winds indi­cate anoth­er year of above-par home improve­ment activ­i­ty in 2022. 

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