The 4Q23 US Remodeler Index (USRI) reflects positive trends in the professional remodeling industry, with a +5 point increase to 58 out of 100, marking the third quarterly improvement in the overall index and the largest since 1Q21. Professional remodelers experienced a moderate uptick in project activity, completing +2 percent more projects year-over-year (YOY), breaking a trend of five quarters of decelerating growth. Home improvement professionals notably saw a significant upturn, completing +3 percent more projects YOY.
Economic uncertainties and market volatility in Q1-Q3 2023 slowed demand, but lead flow improved in Q4. Increased homeowner demand and spending will translate to a greater demand on building products, as well as higher costs for both labor and materials.
A home improvement professional in the northeast expressed their frustration with interest rates affecting business, “If the Fed lowers interest rates during the first quarter of 2024, the prospects of having a much better year will increase dramatically. The actions of the Fed throughout 2023 have put a damper on business. The interest is there on the part of consumers. The willingness to pay high interest rates for their project is not.”
With fewer affordable houses on the market, homeowners are choosing to remodel instead. Home improvement professionals expect a +7.5 percent 2024 revenue growth, up from +2.8 percent expectations.
Professional remodelers spent an average of 5.5 percent of annual revenue on marketing in 2023, with larger companies (annual revenue $5M or more) investing 7.3 percent. In 2024, one-third of professional remodelers plan to increase their marketing budget. Key marketing strategies include social media content, search engine optimization, and sharing customer reviews.
Home improvement professionals have seen a +2.9 percent growth YOY in 3Q23 project completions, up from +2.3 percent. They mention smaller projects, with 40 percent of project backlogs smaller than a year ago. The expected +7.5 percent revenue growth is for the full 2024 year.
After a five quarter slowdown, 4Q23 finally showed modest improvement in professional remodeling demand. Baby Boomers are expected to continue using their wealth to age-in-place, customizing their homes to fit their longer-term needs. The USRI projects Baby Boomers to drive remodeling activity for years to come, as other demographics are priced out of homeownership. This is especially important, as homeowners already balk at the high costs of remodeling projects, and home improvement professionals plan to raise prices in 2024. Higher remodeling revenue is expected from price increases, not a greater volume of work. QR