Editor’s Note: A Major Inflection Point
authors Patrick O'Toole | March 17, 2021
Think fast. That may be the best advice given the fluidity of our current environment. We’re just a few weeks into 2021 and change—perhaps tectonic change—is in motion both within the remodeling industry and the larger economy.
In 2021, the speed of events may leave remodelers and home improvement pros feeling whipsawed. Market signals are mostly positive, but the news is varied.
Among the strong forces at play in remodeling today are increased demand from homeowners; delays in the supply chain; a skilled labor shortage; a super-heated housing market; a shift toward suburban home buying; a surge in outside investment in remodeling; and a fast-changing digital marketing environment.
Underpinning it all is the question of what normalcy looks like now that anyone who wants a COVID-19 vaccine will be able to get one by June.
This month, Qualified Remodeler introduces a new market index with the experts at John Burns Real Estate Consulting. Thanks to those among you who participated in the research, which was conducted in January and February by the John Burns team. The results—detailed here—speak volumes. A group of remodelers from all 50 states expects 10 percent growth this year, the survey reveals. In addition, project backlogs, average project sizes and average price points are also growing.
A byproduct of strong demand is rising prices for everything—inflation. Remodelers need to be very savvy to account for changes in prices for labor, building materials and finishes during the period from contract signing to when final payment is made. There are several ways to do this. Many are simply charging more.
Outside investment in remodeling, moreover, is as strong as I’ve seen it. Investors are helping large home improvement companies grow and expand at a rapid rate. As a result, several firms are transforming from regional to national players. It will be interesting to see the new Top 500 rankings when we publish them in August.
Then there’s the surge in investment within the ecosystem that sustains remodeling and residential construction. Last month, Buildertrend acquired CoConstruct with the help of a consortium of big-name investment firms. Other holding companies continue to acquire firms who serve the remodeling space.
This is not to imply adverse impacts on remodelers and home improvement pros, but it does suggest that owners and managers must in effect pick winners. They must be astute in their choice of service providers in order to avoid unanticipated and perhaps costly business transitions.
The biggest wildcard is consumer behavior post-pandemic. More normalcy will certainly bring more travel as well as more discretionary expenditures on restaurants and hospitality.
Does this mean the surge in demand for home improvements will slow? Does it mean the increase in demand we are experiencing today is really just future jobs pulled forward? Is it a zero-sum game with weaker demand later?
These are tough questions. No one really knows the answers. It will pay to be cautious as well as opportunistic in your strategy this year. QR