Update: The Home Improvement Product Market Is Exceeding Its Forecast

The Home Improvement Research Institute (HIRI) partners with IHS Markit to develop an annual U.S. Size of Market Report. The current report is based on the most recent IHS economics forecast of the U.S. economy and looks at what to expect in the market through 2025.

Due to rapidly falling COVID-19 infection rates and states’ widespread relaxation of containment measures, as well as an accelerated vaccination campaign, an update to this macroeconomic forecast has been published. Some of the upward movement reflects major elements of a $1.9 trillion stimulus package passed by Congress including the third round of stimulus checks, an extension of emergency unemployment programs and benefits, major funding for COVID-19 mitigation efforts, and significant aid to state and local governments, and schools.

“All [of these improvements] have boosted consumer confidence and the housing market in particular,” said IHS Markit Global Construction Director Scott Hazelton, who has more than 30 years of industry research experience. “Home improvement spending growth will moderate from 13.8% in 2020 to 9.9% in 2021, but spending by contractors will actually improve year over year as households feel more comfortable with contractors in their home.”

Here are some of the key takeaways from the report. 

National economic outlook

  • Rapidly falling COVID-19 infection rates, states’ relaxation of containment measures, and an accelerated vaccination campaign will allow a gradual recovery in spending on services currently restrained by social distancing.
  • Real GDP grew by 4% in the last quarter of 2020, 1 percentage point faster than our recent projections.
  • Despite an additional $1.9 trillion fiscal stimulus, inflation in core personal consumption expenditures remains below 2% through mid-2024.
  • While we expect fiscal stimulus efforts to fade next year, the GDP is predicted to grow 4.1% in 2022.

Home Improvement products market outlook

  • Good news: The updated forecast features an improved outlook for the home improvement market. The total home improvement market (in nominal dollars) is projected to grow by a strong 9.9% in 2021.
  • Sales of home improvement products in 2020 were higher than estimated in our August outlook. The total home improvement market grew by 13.8% to $460 billion — 5.1% higher than our previous estimate.
  • The housing market also gained speed in the second half of 2020. Overall, existing-home sales increased 6.5% last year, an increase of 11.2% relative to our forecast in August.
  • We expect growth in home improvement product sales to ease in 2022, as many homeowners completed projects in 2020 or will do so this year.

Scott says that although the boom cannot last forever, a continuing strong economy suggests that further growth of 5.7% is attainable in 2022.

To get full access to this report and other reports on the home improvement market, join HIRI.

 

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