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The National Kitchen & Bath Association – the world's leading non-profit trade association for the kitchen and bath industry providing tools, research, certification, and events for over 50,000 members – has released its baseline Kitchen & Bath Market Outlook for 2022. The report projects that the kitchen and bath industry is poised to experience a 19% year over year (YOY) increase in spending – from $167 billion to $199 billion – for residential kitchen and bath construction and remodeling.
In an atypical trend, spending on new construction will see a 21% increase, although new housing starts are only predicted to increase by 6% in 2022. This can be attributed to a growing backlog carrying over from 2021 and marginal improvement in builder construction cycle time. John Burns Real Estate Consulting data in the report predicts home prices will continue to appreciate in value (approximately 9%) versus approximately 6% for Inflation. A continued strong home market and an increase in home value bodes well for the kitchen & bath industry as homeowners look to capitalize on their home's equity.
Besides new construction, it is expected that banks will begin easing credit standards for home equity line of credits (HELOCs) to drive origination volume since housing values remain high. Consumers will use those funds to remodel. According to the Market Outlook, when financed by HELOC, the average spend per kitchen and bath remodel more than doubles. Specifically, homes built during the mid-2000 housing boom are now considered by many consumers to be "outdated" and are expected to drive increased kitchen and bath remodels. The report found that the industry is expecting over 16% growth from these 'prime remodel vintage' homes or houses between 20 and 40 years old that were not renovated during the initial COVID remodeling boom.
With that in mind, it can be predicted that DIY will continue to remain strong in 2022 as the report forecasts a 9% growth in spending. DIY spending is expected to account for $25.9 billion – mostly in lower to mid-price point projects – in 2022.
"As we begin 2022, the industry as a whole continues to be optimistic and is forecasting continued rapid growth in both new construction and remodeling. The expected growth rate for 2022 is one of the highest predicted in the history of KBMO," said Bill Darcy, NKBA CEO. "Even with this increasing demand, however, we cannot dismiss the current risks we are facing."
According to this latest Market Outlook, the impact of labor availability will remain a major obstacle. Findings show that between 2022-2025, unfavorable demographics will cause near-zero growth in the 20-65 age bracket, which makes recruiting more difficult in a rising demand environment. While an escalating talent shortage has been a long-time obstacle impacting the industry, with the number of projects increasing exponentially since the beginning of the pandemic to the present, this challenge has caused the completion of projects to become delayed, leading to major backlogs.
Additionally, growing demand will continue to exacerbate ongoing supply chain challenges. Due to the kitchen and bath industry having a more complex supply chain than most other US industries, delays and other complications have a higher probability as various stakeholders coordinate to deliver products. According to the data, prices account for 6% growth, driven by inflation, product shortages, and rising labor costs.
"The challenges faced by the kitchen and bath industry are not new but are compounding. For example, the results from our Q3 Kitchen and Bath Market Index show that led times for domestic and foreign raw materials are well over 6+ weeks and has many within the sector struggling to keep up with demand in today's economy," Darcy said. "However, the kitchen and bath industry is resilient. In fact, we are seeing the industry evolve before our very eyes as across the board, stakeholders are proactively taking new and creative steps to address these obstacles – and the fruits of their labor are visible as new opportunities arise."
To learn more about the key findings from NKBA's baseline 2020 K&B Market Outlook report, visit here.
If you are registered for KBIS and would like to schedule an interview with Bill Darcy, CEO, NKBA or Tricia Zach, head of research, NKBA about the NKBA 2022 Market Outlook and/or NKBA 2022 Design Trends, email email@example.com.