Home improvement market forecast
The Home Improvement Research Institute has uncovered several key findings from its latest U.S. Size of the Home Improvement Products Market report. Chief among the data, perhaps, is a revised downward forecast for market growth in 2025 due to "prevailing macroeconomic challenges." HIRI reports the total home improvement market, which reached $574.3 billion last year, is now projected to grow by 3.4% in 2025, a reduction from the 5% growth projected in HIRI’s March outlook.
The updated forecast also reveals a divergence in anticipated growth rates between the professional and consumer markets. According to HIRI, consumer market sales growth in current dollars is expected to grow by 2.6% in 2025, revised down from the 4.9% forecast in March. However, professional market sales are projected to grow faster at 4.9% in 2025, which is more in line with the March forecast.
“While our latest forecast reflects some near-term adjustments due to economic headwinds, the long-term picture for the home improvement market remains one of significant opportunity,” says Dave King, Executive Director of HIRI. “Looking out over the next five years through 2029, we anticipate a net gain in total market spend of roughly $300 billion in additional spend. While this growth is expected to be stronger toward the latter half of the period, it reflects that the underlying appetite and demand for home improvement projects are still robust.”
HIRI's research highlights four key points affecting home improvement spending:
- Rising costs and tariffs. The forecast incorporates the impact of anticipated Section 232 tariffs to hit on materials like copper and lumber (ranging from 10% to 25%), effective in late 2025. Additionally, IEEPA tariffs on imports from China (20%), Canada (25%) and Mexico (25%) are included. These factors, along with potential labor shortages, are expected to raise construction costs.
- Housing market challenges. The “locked-in effect,” where homeowners with low mortgage rates are hesitant to sell and buy at current high rates, is hindering existing home sales. Builders are also cutting prices and offering incentives on new homes due to high inventory. The forecast anticipates a slow rebound in existing home sales, climbing from 4.07 million sales in 2024 to 4.28 million in 2025 and 4.78 million in 2026, but housing starts are expected to remain relatively flat or dip slightly, per HIRI.
- Slowing consumer spending and income growth. While consumer spending grew in Q1, wage growth is slowing and prices are rising, leading to modest growth in disposable income. Inflation is also expected to spike in Q2 2025, reaching 3.9% for the year as tariff impacts arrive.
- Cooling labor market. While recent job reports show resilience, the forecast anticipates a cooling labor market with monthly payroll gains stalling in the second half of 2025 and the unemployment rate projected to peak at 5% by late 2026.
The report also notes a 35% probability of a pessimistic scenario, which includes the potential for a two-quarter recession beginning in mid-2025, driven by a deterioration of financial conditions and negative responses to policy assumptions regarding trade and immigration.
