HIRI expects home improvement spending slowdown

The Home Improvement Research Institute (HIRI) is forecasting home improvement spending will rise at a slower pace after two years of extreme demand throughout the pandemic.

In its latest forecast, HIRI said it expects overall consumer market sales will increase by 2.8% in 2023 to $382.5 billion. The institute the forecast is a result of rising inflation, reduced real household income, and completed projects during the pandemic.

In 2020 and 2021, consumer spending on home improvement soared to 15% and 13.3%, respectively, as homeowners invested time and money into their spaces that served as homes, offices, schools, gyms, and more, HIRI reported.

“The extreme increase in demand for home improvement products that we witnessed because of the pandemic was bound to calm sooner or later,” said HIRI Research Director Matthew Craig. “While consumer spending is easing slightly on home improvement products, it is important to emphasize that any future boost is compounded on previous unprecedented growth. The market is still performing very well.”

HIRI cites differing economic circumstances and homeowner needs as reasons for the shift in consumer demand. 

This year, households are seeing real income decline as inflation climbs and stimulus payments recede. The Forecast predicts U.S. real disposable income to decline by 3.5% in 2022 after climbing 2.2% in 2021. 

For those left unaffected, disposable funds are expected to be directed toward hobbies or other major purchases, as many report pandemic-era projects being brought to completion. However, contractor-led projects are expected to see an uptick as homeowners become comfortable allowing professional help into their living spaces again.

In the short term, the forecast predicts the total building products market to grow by 4.2% in 2022, with the consumer market growing by 2.6%, and the professional market growing by 7.9%. 

Between 2024 and 2026, the consumer market is expected to average about 3.2% growth, and the professional market to average around 4.8% growth for the same period. This projection highlights a significant rise in contractor activity as well as an overall continued interest in home improvement in the coming years.