Growth is Driven by Higher-End Projects for Boomer and Gen-X Homeowners
By NKBA | KBIS Editorial Staff
While inflation remains stubborn and continues to soften demand from low and middle-income consumers, a variety of positive factors are moving the resilient U.S. kitchen and bath market in a positive direction, according to the Q1 2024 NKBA/John Burns Kitchen & Bath Market Index (KBMI) report. These factors include high levels of wealth (particularly among boomers), growing volume of aging-in-place renovations and a strong labor market. Many NKBA members report that they are planning for increased sales in 2024, typically in the mid-single digits, though projections are tempered by expectations that interest rates will remain high for longer than anticipated.
In Q1 2024, the KBMI Index rated 56 out of 100 (up from 54 in Q4 2023), an increase of two points quarter-over-quarter. This is the highest KBMI rating over the past year, indicating that the industry is beginning to expand, albeit at a measured pace. Conducted jointly by the National Kitchen & Bath Association and John Burns Research and Consulting, the KBMI report includes data and insights from 508 NKBA members across four segments: design, building and construction, retail, and manufacturing.
Here are some highlights of the Q1 2024 KBMI report:
Demand is Uneven, but Positive Signs Abound
Retailers report that foot traffic increased for the first time in nearly two years. Manufacturer orders ticked up and kitchen and bath firms surveyed in January expect their sales to increase by 6% on average in 2024, with expected growth across all segments. The design (6.2%) and manufacturing (6.8%) sectors expressed the most optimistic outlook.
Higher-End Projects Continue to Drive Growth
Even as some homeowners remain cautious about undertaking major remodels, higher-income consumers, who are more likely to fund their projects with savings, are pushing ahead. Demand for large, higher-end projects – mainly from trade-ups-in-place – is strong. K&B pros report that Boomers and Gen-X clients are proceeding with major remodels to address family and changing lifestyle needs, such as retirement and aging-in-place planning. Lead quality continued to increase at the high end: projects priced over $100K yielded increasing profit potential as the year began.
Geographical Areas of Growth
The report offers some key insights into the most promising growth markets. While millennial demand for K&B renovations is lagging nationally, largely as a result of high borrowing rates and continuing sticker shock, the report indicates it is strengthening in the Southwest. Meanwhile, Boomer and Gen-X households, which tend to be less reliant on borrowing, remain a particular bright spot in the Northeast and Midwest.
Interest Rate Concerns Also Vary by Region
The U.S. residential kitchen and bath industry’s concern over elevated interest rates is most strongly felt in the West. The average level of concern among surveyed professionals was highest in California and lowest in the Northeast, where several firms cited a gradual acceptance of higher rates.
Pricing Power Remains Strong
Despite consumer concerns over pricing, K&B pros believe pricing power – and its impact on profitability – remain strong. Surveyed design firms said they could push price increases as high as 7.3% in 2024, while building and construction firms reported that consumers could tolerate nearly comparable price hikes (6.4%).
Familiar Concerns
KBMI respondents say the availability and cost of skilled laborers remains a persistent structural issue, preventing them from keeping up with demand. This concern was followed closely by cost inflation, interest rates and material costs.
“It’s clear that elevated borrowing rates may be with us for longer than was expected, which is keeping many younger homeowners on the renovation sidelines for now,” said Bill Darcy, Global President & CEO of NKBA | KBIS. “However, we are seeing important signs of growth, nationally, and especially in certain regions of the country. Meanwhile, the continued strength of the high-end market is proving to be a powerful sustaining force as we collectively wait for rates to come down and renovation activity levels to increase in response.”
Download and read the full Q1 2024 NKBA/John Burns Kitchen & Bath Market Index (KBMI) report here.
