Here’s the headline: “Remodeling is still growing in 2019 but the rate of growth is slowing in most major metro areas.”
That’s from a new Harvard University report released by its Remodeling Futures Program.
You can read the full summary of the report here.
What follows are three critical findings, each of which needs to be incorporated into the way you operate your home improvement business.
#1. Home Improvement Companies Remain Bullish
The rate of growth is slowing, but growth continues.
Contractors are very optimistic about the near-term future. They’ve been that way for the past five years, but this report suggests they are even more optimistic than before.
For example, the percentage who expect their revenue to increase by more than 10% over the next year rose from 60% to 65%. And that was just during the six months between Q3 2018 and Q1 2019! They are also receiving more homeowner inquiries, with a whopping 84% reporting that number steady or rising over just the past three months.
All good news. And it means that home improvement companies should take advantage of today’s strong market. Specifically:
- Invest in staff. Continue hiring new people and investing in training – in-house, professional development courses, industry events. Staff who are proficient in SEO, PPC, etc., will play an even more important role in your company’s growth.
- Invest in systems and processes. If you don’t have a CRM, get one. If your internal processes are shaky, fix them. Now is the time to get your house in order, while revenue is coming in and demand is strong.
- Invest in new markets and lead generation channels. The upward trends won’t last forever. This is the time to explore new markets and opportunities. When the next downturn inevitably arrives, you’ll have learned enough to narrow your marketing tactics and fine-tune the target homeowners who respond best to your services and offers.
In a word, it’s time to invest in your business.
#2. Home Improvement Market Strength Varies by Age and Location
You probably have a good sense of what your “perfect buyers” look like. How old they are, where they live, what products they prefer.
But broad market generalizations tend to overlook niche opportunities. Understanding what lies beneath the overall numbers in your territory could be the key to your long-term growth.
For example, while the report found that nationwide, older homeowners continue to dominate the remodeling market (those over 55 account for half of all improvement spending), homeowners under 35 grew by 6% over the past two years. Their overall spending grew by more than 20%.
All of this varies by location as well. We know that older homeowners live in warmer climates and younger homeowners tend to live in more affordable metros. But we may not realize how significant these age and geographic differences can be. For example, we can see in the map below that homeowners over 65 in Tampa, account for more than twice as large a share of overall home improvement spending. Compared to the same demographic in Houston (37% vs.15%).
Your marketing and operational processes need to align with these new opportunities. Consider Millennial and Gen Y homeowners. They only account for a small part of today’s total home improvement spending. But that share is certain to grow. This demographic cares more about how things are made and the materials used. They’ve grown up paying on credit and expect financing options. And, of course, they are more tech-savvy and mobile-based and expect to communicate via text and email, not just over the phone.
As the saying goes, “the riches are in the niches.” Make sure you understand where yours lie and act accordingly.
#3. Home Improvement Spending Varies by Category
The residential remodeling market reached a new high of $424 billion in 2017. Since 2010, it has grown by over 50%.
But not all categories are growing equally.
Consider kitchen and bath, a $158 billion market. Between 2011 and 2017, bath remodel spending grew by 43%, while kitchen remodel spending grew by just 29%. This difference is significant. Kitchens and baths both represent interior, discretionary spending. But if you lump the two together, you miss the fact that they are not growing at the same pace.
So, dig in and investigate these types of category differences within your own home improvement business. Areas that are flat (or even losing ground) can be risky, particularly if overall growth continues to slow. Be careful about committing too many resources (human and otherwise) in these areas and invest more in the categories that are on the rise.
(Click here for an interactive chart regarding historical changes across home improvement categories.)
Pay Attention to Where the Market is Going
You don’t have to read every report or analyze every stat in order to operate your home improvement business successfully. But it is important to stay current and make decisions based on data, not just history or intuition.
Today’s rising market tide is lifting all boats. All home improvement companies are benefiting as a result. Use this time to prepare for the future now. Analyze, improve and invest in your business!