BETHLEHEM, PA — The year ahead “will be a challenging time” for both residential construction and the kitchen and bath industry, with total revenues projected to decline as higher interest rates, inflation and recession fears hit consumers in the pocketbook, according to the latest forecast from the National Kitchen & Bath Association.
The NKBA’s baseline Kitchen & Bath Market Outlook Report for 2023 indicates that inflation and mortgage rate increases in the past year “have effectively reversed the momentum the industry enjoyed in 2020 and 2021.”
The Bethlehem, PA-based NKBA estimated that kitchen and bath spending will total $162.4 billion in 2023, a year-over-year decline of 14%. Spending in new homes is expected to decline 17%, while remodeling spending is expected to fare better, falling 10%, the NKBA said.
“Although this estimate is down from the record highs of 2022, it’s still strong relative to pre-pandemic levels,” the NKBA said, noting that “consumers are feeling the impact of higher interest rates and inflation, which have chipped away at savings that peaked during the COVID-19 pandemic.”
Remodeling, as opposed to new construction, will sustain the kitchen and bath industry in 2023. For one thing, the number of homes entering their prime remodeling years (20-39 years old) will increase by 2.9 million by 2027, and these homes have 15-24% kitchen and bath remodels than the U.S. norm. In addition, nearly 90% of outstanding mortgages are locked in at rates below 5%, “so these homeowners are choosing to remodel rather than to move,” the association said.
Lastly, since housing inventory will remain low in 2023, “demand for single-family rentals will remain strong and fuel the industry in 2023,” said the NKBA, adding that some 13% of all kitchen and bath remodeling spending in 2023 will come from renovations to single-family rentals.