The National Kitchen & Bath Association has released its baseline Kitchen & Bath Market Outlook Report for 2023. The report indicates that the year ahead will be a challenging time for both residential construction and the kitchen and bath industry. Inflation and mortgage rate increases have effectively reversed the momentum the industry enjoyed in 2020 and 2021.
NKBA estimates that K&B spending will total $162.4 billion in 2023, a year-over-year decline of 14 percent. Although this estimate is down from the record highs of 2022, it’s still strong relative to pre-pandemic levels. K&B spending in new homes is expected to decline 17 percent, while remodeling spending is expected to fare better, falling 10 percent.
Remodeling will sustain the industry in 2023. A few factors are helping to drive demand for K&B remodels even during these uncertain economic times. First, the number of homes entering their prime remodeling years (20–39 years old) will grow by 2.9 million by 2027, and these homes have 15–24 percent more K&B remodels than the U.S. norm. Next, nearly 90 percent of outstanding mortgages are locked in at rates below 5 percent, so these homeowners are choosing to remodel rather than move. Finally, since housing inventory will remain low in 2023, demand for single-family rentals (SFR) will remain strong and fuel the industry in 2023. Thirteen percent of all K&B remodeling spending in 2023 will come from renovations to SFR properties (i.e., $8.5B out of $66.7B).
- K&B Spending to Reset/Decline. 2023 Kitchen & Bath revenues are projected to total $162.4 billion in 2023, a YOY decrease of 14 percent.
- Higher Rates and Inflation Impacting Consumer Spending. Consumers are feeling the impact of both, especially inflation, which has chipped away at savings that peaked during the pandemic.
- Remodeling Will Sustain the Industry in 2023. Eighty-six percent of outstanding mortgages are locked in at rates below 5 percent, so these homeowners are choosing to remodel rather than to move.
- 2023 Recession Risks have Significantly Risen. The probability of a recession over the next 12 months has increased to 63 percent, according to the Wall Street Journal Forecasting Survey.
For more information, visit www.nkba.org