The remodeling industry will continue to grow at upper-single-digit rates for the next few years, driven largely by baby boomers, while the DIY sector will grow as more millennials become homeowners, the president of Hanley Wood’s Contractor Group says.
Rick Strachan noted in a recent PowerTips Unscripted Podcast, sponsored by Remodelers Advantage, that the remodeling industry has experienced considerable growth in the past 30 years, leading to greater professionalism and organization among firms in the industry. And while residential construction is expected to experience growth bumps toward the end of 2019, Strachan says economists believe the remodeling industry, by contrast, will continue to experience healthy growth.
“The word I’m using in the market right now is the perfect rainbow after the storm of the Great Recession,” said Strachan, who has spent 35 years serving remodelers and suppliers.
Another Hanley Wood company, Metrostudy, projected continued positive growth for the industry in its most recent Residential Remodeling Index (RRI). The second quarter 2018 RRI value was the index’s highest-ever reading, finding that economic conditions known to influence remodeling activity are 14.4% better than the previous peak before the Great Recession.
The remodeling industry’s rise in recent years has been driven by the Baby Boomer generation, and Strachan said this generation will continue to drive the industry for years to come. That’s in part because the older people get, the less likely they are to choose DIY projects and favor professionally done jobs instead.
This development is most pronounced in the age cohorts of 55-64 years old and 65 years old and above, where households said they would prefer professional jobs to DIY 81% and 87% of the time, respectively. The cohort aged 50 years or older accounts for 55% of the remodeling industry, Strachan said.
In addition, he said, the desire by boomers to retire and “age in place” is likely to also provide a boost to remodeling business and numbers.
“People automatically think about things like grab bars and low threshold floors,” Strachan said of what people typically consider preparations for aging in place. “But I think we’re also seeing that as people are nearing retirement, they want to make sure their house is in good shape so they are not going to have to spend in their retirement years.”
Meanwhile, the millennials increasingly are becoming homeowners. As they buy, Strachan predicts they will begin to do DIY projects, and so over the years the DIY share of remodeling expenditures will start to increase.
This projected growth and positive outlook comes against the backdrop of current problems in the industry, in particular the labor shortage and product and material cost increases. Strachan said many remodelers are still struggling to employ enough workers to meet the high demand. To fight that shortage, Strachan said firms can engage locally through high schools and trade schools in efforts to engage the potential labor pool at younger ages.
As for higher material prices–a trend aggravated by recent threats and impositions of tariffs–Strachan said remodelers can form good relationships with local suppliers and manufacturers.
“Some firms I know have put in alliance programs where they actually have developed relationships with local suppliers or even manufacturers so they’re at least getting preferential treatment,” Strachan said. “Sometimes that might not come in the actual hard price of the product, but maybe some of the other things that go along with it that can affect your bottom line.”
The large growth in the remodeling industry has also brought about greater professionalism among firms who offer payrolls. Strachan said that over his decades in the industry, remodeling firms have been required to adopt systems and processes for their businesses and add area like human resources departments. This has bred greater professionalism industry-wide, he said.
The executive also said the growth of home improvement stores and television networks like HGTV have benefited the industry.
“They [home improvement stores] have actually brought a lot of attention to what is popular in the market,” Strachan said. “The same thing can be said for HGTV television. People may get unrealistic views about what can be accomplished but at the same time, I think it’s brought a lot more attention to what is possible.”
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