Building ProductsNational Housing Market Outlook

Kitchen & Bath Professionals Signal Resilience for the Remodeling Market

Elizabeth LaJeunesse

June 29, 2023
The market for kitchen and bath products and remodeling services is an essential bellwether for discretionary building product spending. With economic headwinds, including higher interest rates, tighter financing conditions, and higher-than-average inflation tempering building product growth expectations for 2023, National Kitchen and Bath Association and John Burns Research and Consulting partnered to take a “temperature read” on evolving conditions for the US kitchen and bath industry.

Over 250 kitchen and bath professionals we spoke with in early June indicated that while growth in 2Q will be slower than last year, they expect a rough patch to be mild in duration. In fact, designers, builders/remodelers, retailers, and manufacturers alike remain optimistic about the underlying strength of demand for their products and services.

Amid these mixed signals, pros also indicated a “silver lining” for companies that undergo slower growth in mid-2023, as this period can provide time and opportunities to explore new technologies to support growth when the market picks up again, as it surely will in coming years.

Here are the main takeaways:

1. Despite wider expectations of a downturn for the building products market in 2023, kitchen and bath professionals are optimistic, still rating the health of their segment as normal relative to history.

In June, we asked pros for an advance read on the economic health of their segment of the residential kitchen and bath industry on a scale of 0 (extremely weak) to 100 (extremely strong). The result? Pros’ average rating was 58 out of 100, meaning they feel their industry’s health is in a normal range. These results align with our “Health of the Kitchen and Bath Industry” index, which has proven to be a highly reliable measure of market conditions.

While the index has trended lower since 2021, it remains elevated compared to 2020, when a Covid-led recession occurred.

As Bill Darcy, CEO of NKBA, explained,
“There definitely is a mixed consensus among the NKBA Community in terms of how revenues will perform in the latter half of 2023. Although some members are being impacted by softening consumer demand, many geographic markets and brands seem immune to any signs of a slowdown. We will look to the next KBMI for the official measure of Q2 performance and expectations for 2023 and 2024.”

2. Overall demand for kitchen and bath remodeling remains steady. 

Nearly 7 in 10 kitchen and bath professionals reported that homeowner interest and demand for residential kitchen and bath improvement and remodeling services is as strong or stronger today than it was over the past three years. This finding is particularly significant considering that demand in 2021 and 2022 included double-digit sales growth, on average. Only a small share (31%) of pros cited weaker demand conditions.

As Bill Darcy further explained,
“Homeowners absolutely love to invest in their homes to make them better. Remodeling is a necessity for some, but for many, it is a hobby, or in some cases, an obsession. A kitchen or bath remodel enables a homeowner to improve the functionality and aesthetics of their home, but it also can increase the value of their home, contribute to the quality of their life, and elicit a sense of pride.” 

Many pros we spoke to cited inflation and other financial headwinds as dampening consumer sentiment. However, they also pointed to pockets of strong demand, including baby boomers continuing to do projects to promote enhanced accessibility and livability. Other segments frequently cited as “hot” right now include Gen-Xers and new career millennials, especially young couples with good incomes flooding some markets. With financing being harder to access, large multi-room remodels are on a downtrend. Partial remodels are picking up, including remodels of outdated (“prime remodel”) homes, and this structural tailwind is expected to persist through the next several years. Multifamily / apartment kitchen and bath remodels are also reported as a strong segment.

“Not only is a kitchen remodel a top choice of homeowners looking to stay in their homes for the long-term,” said Darcy, “but it can also have big payoffs to homeowners who are planning to sell their homes when mortgage rates moderate. A newly renovated kitchen often helps homeowners sell their homes faster and for more money.”

3. Some kitchen and bath professionals shared concerns over softer market conditions in 2Q23.

Thirty-six percent of the pros we spoke with said they expect their company sales to decline on a year-over-year basis in 2Q, and 40 percent said they expect sales to remain steady, compared to only 24% expecting positive growth. These early, cautious expectations for softer 2Q23 sales are consistent with higher interest rates and stricter financing conditions—conditions expected to dampen the discretionary remodeling activity of some, but certainly not all, owners. And yet, kitchen and bath pros continue to express cautious optimism about the depth of the rough patch: Three-quarters of them believe their 3Q23 sales will come in flat or higher compared to sales in 2Q23, versus just one-fourth expecting negative quarter-over-quarter sales growth.

As Bill Darcy explained,
“This early read for Q2 and Q3 performance aligns with the strategies we see being executed by several of our largest NKBA and Global Connect members who are making significant capital expenditures in the North American market.  They are looking past 2023 and focusing on the bounce that many industry economists predict will begin in 2024 and last for the remainder of the decade.”

4. Opportunities abound for companies to invest in their future growth by adopting new technology.

When asked how new technology—particularly artificial intelligence (“AI”)—will impact their business, we found that a select group of tech-savvy pros are already using it in helpful ways.  Designers, retailers, manufacturers, and remodelers/builders cited new AI-powered technology as providing efficiency gains for tasks such as marketing/social media, design visualization, and even writing kitchen and bath product descriptions on their websites. 

To be sure, human judgment will remain vital in this space. As one professional designer explained, “Clients have difficulty putting into words what they want. It takes an intuitive and seasoned designer to do that.” Even so, many pros envision a greater role for AI in generating designs and assisting in selecting finishes and textures.

Other important tasks cited as ripe for efficiency gains with the help of technology include contract management, project management, space measurement, and training employees.

Kitchen and bath companies that anticipate softness in the middle part of this year can take time to re-invest in the businesses and in technology to increase operational efficiency and optimize their social media strategy. Those that use tech to their best advantage should begin to see payoffs when the market cycles back upward again in 2024

In partnership with the National Kitchen and Bath Association, the Kitchen and Bath Market Index Survey examines current kitchen and bath industry demand, future expectations, and issues and challenges that industry professionals are facing in their businesses. For more insight into building products industry conditions, please contact us or check out our research and consulting solutions.

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About The Author

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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