Building ProductsNational Housing Market Outlook

A ‘Traffic Light’ Outlook on the Kitchen and Bath Industry

Christian Beard

Chris Beard

Kylie Raposa

Elizabeth LaJeunesse

March 24, 2023

The $180 billion US residential Kitchen and Bath (K&B) market is a bellwether for consumer spending on home improvement. So we partnered with the National Kitchen and Bath Association years ago to survey their members for trends they are seeing. Our latest Kitchen and Bath report and ongoing research highlight three “green lights,” two “yellow lights” and two “red lights,” which we will share with you below.

Pause Button Is On as Seasonality Claws Its Way Back

Kitchen and bath industry professionals indicate backlogs, which currently average 3.9 months, will sustain demand into 2023.

As one design firm reported, “Our business is still strong—we are still scheduled out with installations over nine months. Customers continue to shop and buy.” To some extent, long lead times reflect the undersupply of skilled tradespeople required to install K&B projects. Yet they are also a clear indicator of sustained K&B project demand and pre-planned project activity going into 2023, which should help support revenue growth despite broader signs of a remodeling slowdown.

Green light #2: Lack of inventory, aging US housing stock, and elevated home equity levels all mean many homeowners will continue to “trade up-in-place” through remodeling.

US Census Bureau data suggest that over two million additional US homes will reach their “prime remodel” years through 2027—a time when homes often undergo their first round of major K&B renovations.  Homeowner equity also remains at near-record levels (above $350K per homeowner).

According to our forecasts, this will translate into approximately 1.3 million K&B renovations annually to these homes (that are 20-39 years old) between 2025 and 2027. Of these, we expect over 200,000 annually will be priced over $25K (which alone means over $5 billion in large-ticket activity annually).

Even if demand slows temporarily, the pool of homes eligible for K&B upgrades is steadily increasing.

As one K&B firm further expressed, “People are still wanting to remodel rather than buy in this market.”  Homeowners feel locked into their current homes for various reasons, including higher interest rates and lower for-sale inventory. They are making the best of it by renovating the look of these homes.

Green light #3: Innovation in the K&B space has been tremendous in recent years, which should stir up new demand.

Product innovations, including smart appliances and faucets (e.g., touchless, energy efficiency, germ/stain/fingerprint resistance) are elevated in the K&B segment relative to most other BP categories.  The pipeline for new product launches by manufacturers, especially in plumbing and appliances, is robust.  For example, smart water systems which integrate water monitoring and management (including leak detection) through an app.

According to one K&B firm, a “higher level of [product] design” is generating more interest in the newest kitchen appliances and in bathrooms.  This bodes well for appliance and faucet manufacturers as it should lead to shorter replacement cycles in years to come.

Given these “green lights” it’s no surprise that when we surveyed K&B pros, they rated the health of the K&B industry as strong, even as they balanced a few cautionary, “yellow” light trends: 

Yellow light #1: Consumer demand signals from K&B installation and design firms are mixed:

Pockets of growth continued among many firms servicing high-end customers. One high-end design-build firm reported they’re “extremely busy doing $35K to $50K bathroom remodels, starting an average of 2–-3 a week.” Others cited retirement-age homeowners paying for renovations in cash, consistent with an underlying trend of wealthier homeowners aging in place.

On the weaker side, however, a similar share of K&B firms cited increasing price sensitivity of consumers on lower or mid-level price points. There are reports of projects trending to a smaller scale as consumers react to increased cost pressures and market uncertainty. 

Yellow Light #2: Widespread K&B product delays have softened. We are seeing big improvements in supply chains; however, some products are still tough to get.

Lead times on cabinetry have improved, and major public manufacturers aren’t reporting any significant product delays. However, pro remodelers tell us kitchen appliance lead times are 16+ weeks in some instances. Normalizing lead times off the record highs experienced during peak COVID-19 are due in part to slower demand conditions.

Our research team continues to keep our clients up to date with thoughtful insight on where the market is headed with our housing and economic forecasts on both the for-sale and for-rent markets. 

Red light #1: The higher inflation and interest rate environment is expected to dampen consumer sentiment and demand.

Large public manufacturers with K&B exposure generally expect total consolidated volumes to be flat or down low-double digits over 2023. Guidance commentary frequently cited macroeconomic challenges as well as softness in new construction. 

While remodeling is often cited as a bright spot, half of building and construction firms in the K&B segment tell us large-scale remodeling projects ($50,000+) are most frequently canceled. “Consumers are re-aligning budgets or breaking larger projects into smaller phases,” particularly as financing is harder to come by

Red Light #2: Availability and cost of skilled laborers is a major concern for the K&B industry:

The labor market remains tight in the K&B industry and is expected to remain that way for the foreseeable future. “Hiring designers, estimators, and production staff is still difficult,” one K&B firm reports. The lack of quality installers and tradespeople has put a ceiling on the revenue growth K&B firms can achieve.

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About The Author

Christian Beard
Chris Beard
Vice President, Building Products Research
Chris manages JBREC’s monthly Dealer Survey and quarterly Prefab Components Index as well as public building products earnings. He leverages his relationships with distribution and manufacturers to help form JBREC’s forecast theses.
Kylie Raposa
Senior Manager, Client Relations | Building Products
Kylie leads JBREC’s quarterly Kitchen and Bath Market Index, produced in partnership with the National Kitchen and Bath Association. She also manages operations within the building products research group.
Elizabeth LaJeunesse
Senior Manager, Building Products Research
Elizabeth is responsible for participating in the preparation of consulting assignments and research projects related to Building Products, including compilation and analysis of market data, preparation of market reports, and custom survey development.

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