CHICAGO — Robust demand for large-scale remodel and renovation projects – including whole-home remodels, multi-room upgrades and interior/exterior projects – continues even in the face of long and often unpredictable product lead times and widespread labor shortages that limit how much the demand is converted to current activity.
That is the key conclusion of the 1Q22 U.S. Remodeler Index (USRI), a quarterly gauge of professional remodeling activity resulting from an alliance between Kitchen & Bath Design News’ sister publication, Qualified Remodeler, and John Burns Real Estate Consulting, a leading housing market research firm.
The latest USRI rates current market conditions at a level of 67.7 out of 100, a sign that the professional remodeling industry expanded for the sixth consecutive quarter on a year-over-year basis. A USRI rating above 50 indicates industry growth, while a rating below 50 reflects declining activity.
Among the USRI’s key findings:
n Project backlogs are growing, remodelers have raised prices, and many have shifted much of their inflation risk onto clients. However, some remodelers note they may be reaching a limit on pricing power, as pushback and postponements due to price are becoming more frequent. “The industry overall is becoming more adept at navigating supply chain disruptions and extremely volatile pricing, and some product lead times are starting to compress,” the USRI report noted.
n 58% of surveyed remodelers report that project sizes increased, despite rapidly rising costs, in the first quarter of 2022. “Remodelers are focusing on these larger projects, where clients are less budget-conscious and willing to accept higher prices to get their project underway fast,” USRI researchers noted.
n Remodelers report raising prices to offset increases in both material and labor costs. Many remodelers price “uncertainty” onto client contracts, for example through escalation clauses. “Most remodeling customers have reportedly taken the price increases in stride, often choosing higher-priced product if it’s available faster,” the USRI said. “Some remodelers have noted an uptick in postponements or pushback on price increases (but) remodelers have adapted to extremely long lead times. Remodelers are getting much better at project planning and substituting products and vendors based on availability; project timelines are starting to stabilize; and some product lead times have compressed.”
n Regarding product/material lead times, “green shoots” are emerging, although a return to normal still far away. “Remodelers’ full-year revenue expectations are slightly lower than last year at this time, a result of elevated demand mixed with difficult comps and project delays,” the report stated. “However, respondents are generally optimistic given the robust backlog of demand.”
With constraints on both materials and labor, more of the 7%–8% growth expected this year is “likely to come from pricing and product mix than volume,” the USRI concluded. “Recent economic uncertainty has also tempered the outlook.”