What Awaits the Remodeling Market Into 2023?

What Awaits the Remodeling Market Into 2023?

The current state of the new-home economy tends to lean toward the bleak, with falling housing starts and declining builder confidence. But the remodeling market may be feeling the challenges a bit less. Though spending slowdowns are happening or anticipated, various indicators point to homeowners investing in their current houses and continuing with project lists begun during the pandemic.

The Joint Center for Housing Studies of Harvard University (JCHS) is predicting a steady downturn in home improvement spending throughout the next year, Pro Remodeler reports, with year-over-year spending expected to grow just 6.5% in Q4 2023 versus an anticipated 16.1% growth in Q4 2022. Factors driving these expectations include a drop from unsustainable growth during the pandemic, higher interest rates, and higher prices for materials and labor.

Despite these contractions, reports from the field paint a picture of continued, if more measured, investment in the remodeling market, both DIY and professional.    

The U.S. Remodeler Index by John Burns Real Estate Consulting dropped from 65.7 in Q2 2022 to 62 in Q3, but remains above the index’s growth indicator line of 50. Among the report’s key takeaways, Qualified Remodeler said, is a 4.9-month average backlog among remodelers, with 56% of survey respondents having at least four months of in-progress or planned projects. Supply chain issues are improving, remodelers said, but most also said that customers are downgrading to stay on budget amid pricing concerns.

Lowe’s also conducted a survey of home improvement professionals. The Pro Pulse Survey found that pros remain optimistic despite challenges, and 73% of respondents expect to have more work next year than this year.

Homeowners Invest in Existing Houses

In a recent study of 4,000 homeowners by Houzz, only 1% of homeowners have canceled remodeling projects so far in 2022 and 23% plan to start a project in the next 12 months. “For many, conditions like limited choices of available homes and rising interest rates are driving them toward renovations and improving their current home, since the cost of moving into a house that fits their current needs has become so expensive,” said Marine Sargsyan, Houzz staff economist. “Moreover, more than half of the homeowners we surveyed have no intention of selling or moving out of their current residences in the next 20 years — or ever.”

Exterior updates and “bringing the outdoors in” were among the projects taking priority.

The Houzz study also found that 91% of homeowners planning remodels plan to hire a professional. Though the report didn’t indicate, this could be due to some DIYers reaching the end of their pandemic to-do list of items they can perform themselves.

With some positive indicators, it’s perhaps no surprise that both Lowe’s and The Home Depot are “faring better than expected,” according to CNBC. “Home Depot financial chief Richard McPhail pointed to an ‘improve in place’ mentality among current homeowners, who might have wanted to sell but changed their minds because they could no longer command top dollar,” the website reported.

That’s reflected in the NAHB’s recent forecasts, as well. “The growth rate for improvement spending will slow due to declines for existing home sales,” Robert Dietz, NAHB’s chief economist, told CNBC. “However, an aging housing stock, work-from-home trends, and a decline for household mobility all favor remodeling spending.”

Stop Selling. Start Solving Homeowners’ Pain Points.

For many of us, we’ve been programmed to sell a certain way: Hard selling, non-stop calls, high pressure. But the old methods are problematic. For one thing, you wind up playing a pricing game, with little else to finish the deal. And, perhaps most importantly, homeowners no longer want to be sold to, and they are armed with information they didn’t have before.

What’s a better way? Become a problem solver for your remodeling clients. Take the time to understand their home, identify its pain points, and sell products that solve these issues. Paul Burleson, Westlake Royal Building Products’ National Remodeling Accounts Manager, calls this a “sick home selling system.”

Burleson travels the country training contractors and remodelers on a prescription method of selling. The remodeler serves the role of a doctor, diagnosing a home’s problems and then writing a prescription for how to fix it.

He recommends the following tactics for more effective selling:

Change your thinking: Instead of the mindset that you’re selling something, reframe your approach as helping customers buy a solution to fix a problem. One of the things that COVID and natural disasters have taught us in recent years is that we could be shut into our houses at any time. This created a sense of urgency to understand the problems in our homes that make them less safe and comfortable. Rather than selling on pressure and price, you can bring value to your customers by addressing their challenges and making their homes more livable.

Ramp up your education: Solving problems requires an intimate understanding of the products used to fix them. Knowledge of basic features and benefits is the first step, followed by deeper learning of installation best practices. Leverage your LBM dealer and manufacturers for product knowledge sessions and other education.

Understand the effects of trapped moisture and other issues: Trapped moisture is a top enemy of the home because it can create toxic mold. By knowing how exterior products work together to drain away moisture, you can help homeowners make the most appropriate decisions. For example, Westlake Royal Building Products’ CraneBoard® SolidCore® insulated siding has moisture management tracks in the foam and Versetta Stone panelized stone siding has a built-in rainscreen.

Arm yourself with the right tools: When touring the home, use moisture meters, thermal cameras, a Go Pro, and other devices to collect necessary data. Learn how to use that technology to build the case for the homeowner and help them understand the problems or potential problems. For example, a common find is a gutter pulled off the wall, which likely means water running behind the fascia and windows and into the foundation. A $600 fix now can help avoid a $10,000+ overhaul down the road. It’s not smoke and mirrors—they can see and understand your findings.

Another thing Burleson does is give the homeowner a notepad; each of them circles the house and writes down issues that need fixing. Engaging the customer in the process can help build trust and understanding.

Consider a hybrid approach: While nothing can replace the in-person tour, a virtual meeting might make sense for the follow-up discussion. Utilize virtual sessions for busy clients or your own tight schedule.

One thing to keep in in mind is that homeowners know more now than ever. With the Internet, social media sites like Pinterest, and peer reviews on everything from products to your own remodeling services, your clients are coming into the process armed with information about what they want and don’t want. To truly be a valuable resource, you need to stay ahead of them; ensure you have up-to-date knowledge on products, trends, and the latest design and installation techniques.