The Federal Reserve enacted another interest rate hike of a quarter point on Wednesday, likely impacting K&B industry projects.
By Elisa Fernández-Arias
- This was the tenth hike since March 2022
- K&B will likely see an increase remodeling versus building or buying
- The Fed hinted at a potential end to hikes
The interest rate hike on Wednesday of a quarter point will likely have an impact on the kitchen and bath industry, as some consumers become more hesitant about taking out remodeling loans and using credit cards.
K&B will likely see smaller projects that bring in smaller revenues, but renovations will also become more attractive than building or buying new homes, based on the latest NKBA/John Burns Kitchen & Bath Market Index (KBMI). According to K&B pros, surveyed in April, high interest rates leave consumers with only enough money for smaller remodels, or making up for increased rates by reducing the overall price of new builds. However, they also reported high interest rates and borrowing costs make upgrading in place more attractive than buying or building a new home — so homes in their prime remodeling years are in full swing for smaller renovations. According to the KBMI, there are two segments contributing to remodeling demand right now: small, lower-cost remodeling projects by typical consumers, and demand from high-income households who are not relying on credit to refinance their remodel.
Two K&B segments, construction and manufacturing, may be directly impacted by the hike. These segments, which are especially dependent on borrowing costs, have already downshifted because of the Fed’s series of rate hikes started last year.
Forecasters believe that this hike may be the last for a while, considering signs of slower economic growth and a softening job market. Additionally, the Fed’s statement hints that this could potentially be its final hike to attack inflation, with policymakers indicating that they would remain vigilant as to whether there is a need for future rate moves. This language represents a shift in attitude — for months, their language had implied that they expected more hikes to come.
