Update: The Home Improvement Product Market Is Exceeding Its Forecast

The Home Improve­ment Research Insti­tute (HIRI) part­ners with IHS Mark­it to devel­op an annu­al U.S. Size of Mar­ket Report. The cur­rent report is based on the most recent IHS eco­nom­ics fore­cast of the U.S. econ­o­my and looks at what to expect in the mar­ket through 2025.

Due to rapid­ly falling COVID-19 infec­tion rates and states’ wide­spread relax­ation of con­tain­ment mea­sures, as well as an accel­er­at­ed vac­ci­na­tion cam­paign, an update to this macro­eco­nom­ic fore­cast has been pub­lished. Some of the upward move­ment reflects major ele­ments of a $1.9 tril­lion stim­u­lus pack­age passed by Con­gress includ­ing the third round of stim­u­lus checks, an exten­sion of emer­gency unem­ploy­ment pro­grams and ben­e­fits, major fund­ing for COVID-19 mit­i­ga­tion efforts, and sig­nif­i­cant aid to state and local gov­ern­ments, and schools.

“All [of these improve­ments] have boost­ed con­sumer con­fi­dence and the hous­ing mar­ket in par­tic­u­lar,” said IHS Mark­it Glob­al Con­struc­tion Direc­tor Scott Hazel­ton, who has more than 30 years of indus­try research expe­ri­ence. ​“Home improve­ment spend­ing growth will mod­er­ate from 13.8% in 2020 to 9.9% in 2021, but spend­ing by con­trac­tors will actu­al­ly improve year over year as house­holds feel more com­fort­able with con­trac­tors in their home.”

Here are some of the key takeaways from the report.

Nation­al eco­nom­ic outlook

• Rapid­ly falling COVID-19 infec­tion rates, states’ relax­ation of con­tain­ment mea­sures, and an accel­er­at­ed vac­ci­na­tion cam­paign will allow a grad­ual recov­ery in spend­ing on ser­vices cur­rent­ly restrained by social distancing.
• Real GDP grew by 4% in the last quar­ter of 2020, 1 per­cent­age point faster than our recent projections.
• Despite an addi­tion­al $1.9 tril­lion fis­cal stim­u­lus, infla­tion in core per­son­al con­sump­tion expen­di­tures remains below 2% through mid-2024.
• While we expect fis­cal stim­u­lus efforts to fade next year, the GDP is pre­dict­ed to grow 4.1% in 2022.

Home Improve­ment prod­ucts mar­ket outlook

• Good news: The updat­ed fore­cast fea­tures an improved out­look for the home improve­ment mar­ket. The total home improve­ment mar­ket (in nom­i­nal dol­lars) is pro­ject­ed to grow by a strong 9.9% in 2021.
• Sales of home improve­ment prod­ucts in 2020 were high­er than esti­mat­ed in our August out­look. The total home improve­ment mar­ket grew by 13.8% to $460 bil­lion — 5.1% high­er than our pre­vi­ous estimate.
• The hous­ing mar­ket also gained speed in the sec­ond half of 2020. Over­all, exist­ing-home sales increased 6.5% last year, an increase of 11.2% rel­a­tive to our fore­cast in August.
• We expect growth in home improve­ment prod­uct sales to ease in 2022, as many home­own­ers com­plet­ed projects in 2020 or will do so this year.

Scott says that although the boom can­not last for­ev­er, a con­tin­u­ing strong econ­o­my sug­gests that fur­ther growth of 5.7% is attain­able in 2022.

To get full access to this report and oth­er reports on the home improve­ment mar­ket, join HIRI.