BETHLEHEM, PA — Residential kitchen and bath spending is expected to decline 5%, to $179 billion, this year – below the record highs of 2022 but above pre-pandemic levels, according to a newly released forecast by the National Kitchen & Bath Association.
Despite this year’s expected decline, however, the long-term forecast for kitchen and bath remodeling “remains strong” – due primarily to an additional 2.2 million homes entering their prime remodeling years in the next five years, homeowners sitting on record levels of home equity, and repair-and-remodel projects being deferred beyond 2023, the NKBA said.
The NKBA released its 2023 Kitchen & Bath Market Outlook last month, revising the forecast made by the Bethlehem, PA-based trade association in January. Since that time, the NKBA noted, mortgage rates have remained elevated, although inflation has subsided, and both the economy and the job market continue to outperform expectations.
The association’s forecast for repair-and-remodeling spending in 2023 is $68 billion, a decline of 8% from January’s forecast. New-construction kitchen and bath spending is forecast at $111 billion in 2023, a drop of 4% from the start of the year.
The projected repair-and-remodeling decline is due in large part to high inflation, which continues to erode excess household savings, the primary driver of repair-and-remodeling spending during the pandemic,” the NKBA said. “Higher interest rates have also made it less appealing to tap into home equity,” the association added, noting that “one bright spot is that higher-income households are less rate-sensitive and continue investing in luxury kitchen and bath remodels.”
According to the NKBA, about 80% of outstanding mortgages are locked in at rates below 5%, which is far lower than current rates, meaning that homeowners with the lower mortgage rates are incentivized to remodel rather than sell. Household savings rates have also significantly declined from pre-pandemic-era highs, the NKBA said, noting that, as a result, the excess savings that helped the latest remodeling boom have decreased significantly and are trending lower.