After nearly a decade of sustained growth in spending for home improvement projects, remodeling activity is likely to decline during the coronavirus-induced economic downturn. According to the Joint Center for Housing Studies (JCHS) of Harvard University, historical evidence suggests the magnitude of the downturn will depend on the evolving mix of home improvement projects and household reasons for undertaking improvement projects. Senior research fellow Kermit Baker suggests some market sectors in the home improvement industry will likely see a steeper decline than others, regardless of the overall magnitude of the downturn.
Despite the consensus view that spending on home improvements and repairs is expected to decline in the coming quarters, previous economic cycles have shown that some market segments are more vulnerable to downturns than others. In fact, even with a severe cutback in overall spending, historical evidence suggests that some sectors will see only a modest impact on activity, and potentially even experience gains. Prior remodeling cycles suggest that there are at least four dimensions that will influence how well specific home improvement categories will perform during an economic downturn: the method by which the project is installed; the size of the project; whether the project is a “want to do” or a “need to do” project; and the characteristics of the home and the household undertaking the project.
After almost a decade of sustained increases in spending for home remodeling projects, the industry appears to be entering a significant downturn. Spending on replacement projects and system upgrades will likely hold up better than spending on discretionary projects. Smaller-scale projects will likely hold up better than larger ones. DIY activity is likely to become a larger share of spending in many project categories. And finally, upper-income households are not likely to continue to pace the growth in spending in the industry. To the contrary, lower- income households are likely to increase their share of total remodeling market spending.
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