Remodeling Market Predictions: 2022

A Pro Remodeler Thought Leader reveals what he sees happening in 2022

December 23, 2021
2022 remodeling market

Let me review what we saw in 2021 and how that will flow into 2022.

So far, it looks like a good year coming up for home improvement spending. The market is up in the high single digits. Yet remodelers are seeing continuing challenges in labor and the supply chain, which create backlogs.

What’s in Store?

Every project is more challenging from a time and budget standpoint. That, on top of healthy underlying growth, is creating a lot of problems for remodelers. Long lead times have made backlogs harder. Many remodelers are going into 2022 with an unhealthy amount of projects booked already. It’s not good when you have to tell a client, “I’m happy to start on your project, but I can’t get to it for six months.” Moreover, that proposal they offered in November 2021 may be out of date when they get to 2022 in terms of price. As far as market conditions in the near future, the first part of next year will look like the last part of 2021. In terms of the outlook for 2021, I had predicted 8-10% growth, and I think that will occur next year as well.

Changing Model for Success

Historically, in order to be successful, remodeling companies need to be good at sales and marketing. You had to be the best at getting new clients. Yet backlogs and concerns over product delivery and price have created a new metric for success. Most companies have no problem finding new projects, but how can they manage the workload? How efficient can they be at completing projects when a lot of the issues are out of their control? Remodelers often get blamed for what’s going on out there, but contractors don’t have a crystal ball about lumber prices. Many inform their customers that this is an issue and put escalation clauses in all contracts. This environment is changing what you need to do to be successful, at least temporarily. At some point, the market will be more in balance again.

What Does the Economy Add to the Picture?

Despite a strong first quarter for 2022, I see a lot of risk in terms of the market. Consumer prices went up in November by almost 7%— that’s the biggest jump in nearly 40 years. And it doesn’t look like it’s going to resolve. The Fed will almost certainly raise interest rates, maybe as early as March. They are saying to expect three increases in 2022 and three in 2023.

What About the Labor Shortage?

We all know that there are labor challenges out there, and I think they are going worsen. The economy is growing, but we’re not producing any more workers or letting in any more immigrants that have traditionally gravitated to the construction sector. Can construction lure people from other industries? Can they convince restaurant or lodging workers that this field is something they should consider? One way is to raise wages, but that, in addition to materials costs, means higher price tags for projects. At some point, that shifts over into homeowners saying, “I can’t pay that much for a project, so I’m going to do something else.” I think we’ll start to see that in 2022. 

About the Author


About the Author


Kermit Baker served as director of the Remodeling Futures Program at Harvard’s Joint Center for Housing Studies. He is also the Chief Economist for the American Institute of Architects.

Add new comment

Overlay Init