Demand at ‘All-Time High,’ NKBA Reports
HACKETTSTOWN, NJ — Demand for kitchen and bath remodeling is at “an all-time high,” as COVID-19 vaccination rates increase and permanent, hybrid work-from-home lifestyles are encouraging consumers to reconfigure their home layouts.
That’s the key finding of the Q1 2021 Kitchen & Bath Market Index (KBMI), a quarterly barometer that measures the current strength of the kitchen and bath industry, along with the expectations and challenges facing four major sectors – design, manufacturing, retail and building. KBMIs are issued by the National Kitchen & Bath Association in conjunction with John Burns Real Estate Consulting, an independent research and consulting firm for the housing industry.
The NKBA and John Burns Real Estate Consulting reported yesterday that the Q1 KBMI soared to a rating of 79.8, its highest score since the inception of the index. The rating marks an increase of 14.8 points from the previous quarter, and a 38.8-point improvement from the same time in 2020. Scores above 50 indicate expansion and scores below 50, contraction (see graph right).
Significantly, one in three surveyed designers reported that clients are now requesting higher-priced products and finishes, KBMI officials said. Retailers are experiencing that same trend, which is likely a result “of quick-fix, pandemic-driven DIY projects running their course and being replaced by serious makeovers to accommodate new lifestyles,” officials said.
“There is continued optimism in the industry with COVID-19 becoming less of an obstacle due to the rapid vaccine rollout,” said NKBA CEO Bill Darcy. “We are encouraged to see the index reach a historic high and look forward to the continued industry growth as homeowners opt for larger, more upscale remodels.”
“As consumers experience more flexibility in their working arrangements, there’s an increased need for total reconfigurations for their spaces,” added Todd Tomalak, principal of John Burns Real Estate Consulting. “And from an economic perspective, we’ve seen Americans utilizing their stimulus checks and savings from canceled vacations or other activities – which have been largely paused for the last year ¬– for these home-improvement projects.”
As the pandemic’s impact on the market continues to lessen and previously postponed projects resume, backlogs for projects are reaching upwards of three to six months, according to the KBMI. Continued supply chain disruptions from COVID-fueled demand and factory shutdowns at the onset of the pandemic are further affected by the Suez Canal incident and overall port congestion, “but NKBA members remain confident in the industry outlook with expected sales to be markedly higher in Q2 2021,” the Hackettstown, NJ-based NKBA said, adding that surveyed members reported an average of 9.7% growth in the first quarter of 2021, compared to the same three-month period last year.
The following trends are expected to impact the industry through 2021:
NKBA members are seeing larger projects as homeowners invest in whole-home reconfigurations and luxury finishes. Designers also cite permanent work-from-home lifestyles as a catalyst for the shift to high-end, higher-priced materials.
The primary obstacle for members is sourcing affordable materials, as delays and price hikes make it difficult to maintain profit margins. More U.S.-based sourcing could be likely as import delays and pricing become more severe and firms are sourcing outside their approved vendor list to accommodate. Appliances have been the most difficult products to source.
The majority of surveyed firms are increasing labor rates to maintain current staffing levels and bolster recruitment efforts, but these increased costs aren’t expected to deter demand.
With the surge in remodeling demand, 67% of building and construction firms report a backlog of 3+ months and, of that, 21% have a backlog extending through 2021.
With the pandemic affecting many industry professionals, the already strained labor market continued to dwindle. In response, over 60% of companies report increasing labor rates to retain current staff and, of the companies reporting labor rate increases, almost half report increasing labor rates by 10-19%. ▪