Forecast for Home Improvement Market Revised Downward

The Home Improvement Research Institute on Sept. 17 released a revised downward forecast for the sector, noting that macroeconomic challenges are expected to continue slowing market growth this year. The forecast was reported in the institute’s newest “Size of the Home Improvement Products Market” report, which projected annual growth at 2.5%, down from the 3.4% projected in the June report. Last year, the home improvement sector reached $574.3 billion.

The revised forecast also revealed another downward revision for consumer market growth. Consumer market sales are now expected to grow by 1.3%, down from the 2.6% projected in June. Professional market sales are expected to grow by 4.6%, slightly down from the 4.9% forecast in June.

“Although consumer purchasing power may be shrinking in the short-term, research on homeowner sentiment and intent shows that there is still an underlying appetite and demand for home improvement projects,” Dave King, executive director of HIRI, said in a news release. “Businesses need to consider how they show up to meet homeowners where they are during less flexible financial times. Consider highlighting good/better product lines rather than better/best options, because homeowners will be making tradeoffs in order to bring projects to life.”

The report cited several factors for the downward revision:

• Elevated material costs: The U.S. home improvement market is facing persistent inflation, with the Consumer Price Index (CPI) showing a 2.7% 12-month change in July and core CPI at 3.1%. The current outlook accounts for existing and new Section 232 tariff-induced price hikes in core goods and services, with overall consumer price inflation expected to rise to the 3% range later this year as businesses become more confident in passing increased costs to their customers.
• Low housing mobility: The housing market is experiencing significant headwinds, with housing starts dropping 5.3% in Q2 2025 (a five-year low) and existing home sales declining by 2.7% in June. Compounding the problem are consecutive monthly declines in home prices, rising inventory levels, and a "locked-in effect" from homeowners unwilling to trade low mortgage rates for higher current rates.
• Elevated interest rates: Elevated interest rates persist, with the Federal Reserve expected to only slightly drop rates by year-end due to higher core inflation. As a result, conventional 30-year mortgage rates have hovered around 7%, directly affecting mobility and the affordability of large home improvement projects.
• Changing consumer spending habits: HIRI has made no changes to projected growth in disposable income in 2025 relative to its June forecast. At that time, a combination of steady wage gains and resilience in spending set the U.S. on a path to a soft landing. Now, consumers have benefited from a steady labor market, but their resilience for spending is set to be tested as consumers express lower expectations in employment and income for the remainder of this year.

Despite any near-term uncertainty, the home improvement products market is projected to grow 4% from 2025-2029, with lawn and garden equipment and supplies, nursery stock and soil treatments, hardware, tools, and plumbing supplies among the leading product categories in terms of market share and growth during this time.