While incomes are slowly increasing across the country, wages have not yet surpassed the impacts of inflation and higher interest rates. And home improvement spending growth will slow as a result.
The Home Improvement Research Institute (HIRI) recently released its market forecast for 2023 whereby it predicts growth in the total home improvement products market will drop from 7.2% in 2022 to 1.5% in 2023.
The Do-It-Yourself Consumer Market Will Flatten
HIRI expects the consumer market for do-it-yourself (DIY) projects to mostly flatten and grow by just 0.6% next year, citing high homeowner activity on such projects during the pandemic also contributing to the reduction in demand. This would bring the consumer market sales total to $386 billion in 2023, with anticipated future growth at an average of 2.2% from 2024-2026.
“As rates go up, affordability goes down,” said The Farnsworth Group President Grant Farnsworth. “I think there’s a big psychological play at work here beyond the inflation piece. There’s a knee-jerk reaction when rates go up and when there are doom and gloom headlines in the media.”
How Will Home Improvement Professionals Be Affected?
On the contractor side of the forecast, HIRI projects professional market sales will drop from 10.2% in 2022 to 3.6% in 2023. It predicts the growth of professional market sales to average 3.2% from 2024–26.
Despite this deceleration, the professional market is still expected to grow over the next four years. And that’s good news for contractors who specialize in kitchens and baths, or repair and replacement products such as roofing, windows, and exterior doors.
“Where I think we’ll see some opportunity is in the existing home pro market,” said Farnsworth. “Between having folks feel like they’re locked into a low mortgage rate and with fewer options to buy, fewer people are going to move. That, combined with high home equity, means the market is ripe for contractor spend on existing homes.”