HACKETTSTOWN, NJ — While inflation and mortgage rate increases have impacted the kitchen and bath industry, the latest forecast for 2022, though down from previous projections, still represents a double-digit increase over 2021, according to the National Kitchen & Bath Association.
The NKBA’s midyear 2022 Kitchen & Bath Market Outlook, released this week, projected that residential kitchen and bath spending is expected to increase to $189 billion in 2022, 16% higher than 2021, yet $10 billion lower than this year’s initial forecast.
Among the key findings of the association’s outlook:
- New Construction Strength. New construction is projected to represent more than 60% of industry revenues, driven by a record number of new home builds. The report forecasts 21 percent year-over-year new construction growth, unchanged from the initial report in January.
- Larger Projects Gaining Momentum. Higher-end activity has been revised upward due to rapid home appreciation and client movement on deferred projects. With upwards of 20% gains, mid-range projects are expected to register the biggest YOY increases based on growth in new construction. Lower-end work projection has been sharply scaled back due to higher inflation causing many to put their projects on hold.
- Numerous Remodel Drivers. Nearly three in four homeowners are locked into mortgage rates below 4%, making it more cost-effective to remodel than to move. This, along with record-high homeowner equity per household and a high number of homes in prime remodeling years, bodes well for the second half of 2022.
- Normalization of Housing Starts/Completions. While builders are working through the substantial backlog of homes in various stages of completion, the number of new housing starts are falling due to high mortgage rates and home prices. This combination has led to a shrinking gap between home starts and completions.
- Recession Concerns. The Fed has tried to control inflation with three interest rate hikes this year, the latest in June. Of note: The last three times the Fed initiated a cycle of rate hikes, a recession ensued within a year.