By Craig Webb, President, Webb Analytics
They might have had quite different audiences, but the Home Improvement Research Institute’s Insight Summit and Modern Distribution Management’s SHIFT Conference both focused on trends, threats, and opportunities. Here’s are some of the most useful takeaways for LBM dealers.
Fed Rate Cut Benefits Will Be Limited, Slow to Arrive
The Federal Reserve’s half-point reduction in a key lending rate is only the first in a series of cuts that will stretch into 2026, NAHB Economist Eric Lynch predicted during HIRI. These reductions will help reduce mortgage lending rates, but he thinks the rate for a 30-year fixed-rate loan will drop to only 5.5% by the end of 2026. Just over three-quarters of current mortgage holders pay less than a 5% rate, so the Fed cuts’ impact will be limited.
Spending Forecasts
Lynch forecast single family starts would reach 1.02 million in 2025 and 1.1 million in 2026, while multifamily starts—after a 32% drop this year—would rise 3% in 2025 to 332,000 starts and another 18% in 2026 to 385,000. Meanwhile, remodeling spending should rise about 2% this year, 2% in 2025, and 2% more in 2026.
Harvard’s Joint Center for Housing Studies counts both homeowners’ and landlords’ home improvements and maintenance when it makes R&R forecasts. Abbe Will from the center’s Remodeling Futures Group said that, historically, spending on home improvement and repairs goes up about 5%. But in 2023 it rose only 2.0%, and JCHS’ 2024 forecast is for down 5.7%. In 2025, the amount spent should decline about 0.5%, she said, with lots of variation by state (see map above).
Zonda on Remodeling: “Like Holding a Beach Ball Underwater”
Todd Tomalak of Zonda believes repair and remodel spending is in a trough now after the COVID-inspired spurt earlier this decade. But that should end next year, he predicts, with growth rates—up 7.0% in 2025 and 12.2% in 2026—that are much higher than other economists’ forecasts.
He’s optimistic in part because in the 1980s, the last time mortgage rates fell sharply, remodeling spending shot up. In addition, surveys suggest that a lot of people who managed to buy a home in 2021 don’t necessarily like what they bought and want to leave in less than five years. “There’s postponed, festering discontent with their homes,” Tomalak said at HIRI.
And then there’s the ever-rising median age of homes.“The underlying count of homes eligible to have a window-door project are 2x, 3x, the norms,” he said.
Delighted Customers Are Your Best Customers
Companies that provide good customer experiences buy 6.5 times the average customer spend at all stores, Kevin Sachs and Victoria Bough at McKinsey & Co. said during SHIFT. Happy customers also are 15% more likely to stick with the supplier, and it costs 10% less to serve them.
How to get such customers? “Understand the nuanced needs of your customers,” Sachs said. “Sometimes you stop [today] with services that are too obvious. You need to go deeper into the things that are less obvious, outside your core, that will create a true level of stickiness.”
How to do that? “If you shut up and listen, your customers will tell you,” Kathryn Seymour of First Supply said at a later session. Kevin Short of ORS Nasco said his company regularly hosts events to get direct customer feedback. “One this of our customers know us, one-third don’t know much about us, and one-third don’t like us,” he said.
YouTube Matters—a Lot
People watched 30 billion hours of shopping related videos on YouTube in 2023, up 25% from 2022, Google’s John Banfield and Shea Browning said at HIRI. There were 300 million monthly views of home improvement content, creating 15 million monthly hours of watch time.
These searches are for more than DIYers, they said. You might research options, get inspired via YouTube re what to do, and then search for a person who will do it for you.
Such demand makes sense to Patrick Culhane, VP of Brand Strategy at the Brunner ad agency. “People want authenticity and genuineness in the way you might not have seen before,” he said. “There’s a mistrust in brands. They want to hear from real people.”.
Once Hot, Now Not
Liza Hausman, a VP at Houzz, said at HIRI that searches using certain terms show how consumer preferences have changed over the years. For instance:
Term searched | 2016 | 2017 | 2018 | 2019 | 2024 |
Farmhouse style | 9% | 14% | 9% | ||
Butcher block | 10% | 13% | 9% | ||
Granite countertops | 44% | 20% | |||
Contemporary style | 16% | 21% | 11% | ||
Gray kitchen walls | 24% | 31% | 21% |
What were the growing design trends, based on searches in this year’s first quarter vs. 2023’s?
Organic modern style—Natural materials, clean modern lines. Greenery. Natural stone
Japanese influence (e.g. wabi-sabi, zen garden)
Wellness (Cold plunge searches up 74%, indoor sauna, large windows, home spa)
Dark and moody (not actually black, but rooms that set a mood)
Reading rooms—“Dark academia” searches up 219%, “snug” up 157%
Leisure spaces—Listening room up 107%, bocce court up 23%, bowling alley up 18%
Kid zones (race car bed up 106%)
Gen Z Wants Sustainability
Sara Gutterman, CEO of Green Builder Media, said at HIRI that her surveys show increasing interest in sustainability as you work toward younger generations. They’re your future buyers, she told HIRI attendees, so you should pay attention.
Millennials (people born between 1981 and 1996) want resilient structures that can mitigate risks, such as wildfires and hurricanes, she said. They also want what she called “the sustainability unicorn:” Compact homes that are energy-efficient, made of natural materials, easy to clean—“they want it all.”
Eighty-five percent of Green Builder Media survey respondents in Gen Z (those born between 1997 and 2012) say the’ve already been affected by climate change, and 77% are frightened by the future. “When it comes to housing, Gen Z needs to be reassured that the planet will survive,” she said. They want all-electric homes, decarbonization helps enhance a brand, and environmental and social goals matter to them.
“Now is the moment in time to gain your customer’s trust by leveraging sustainability,” Gutterman said. “I cannot emphasize how important this is to the leading edge of the community.”
More Demand Will Aggravate Labor Shortage
How many more homes can America build and fix than it does now given that labor already is hard to find? That question is one of the most pressing one the housing industry faces as it contemplates improving economic conditions.
“We believe it could become a huge issue if we have any kind of rise in the next few years,” Grant Farnsworth, President, The Farnsworth Group, said at HIRI. “You have some contractors saying they are OK with labor today, others no. Most likely, the people who are OK with labor today will have challenges tomorrow. … There are more barriers to labor than there are with solutions.”
Forty-five percent of home improvement pros interviewed this summer said they are expanding service offerings, particularly energy efficiency projects. Meanwhile, 39% are investing in new technology such as estimating software, scheduling tools, and financial management software.
A MIDAS Sales Model and Dealing with Reps
Andy Clement, who arrived recently at Gartner as an Executive Partner after having spent 33 years at Kimberly Clark, said at SHIFT that his company promotes what it calls the MIDAS Decision Model to achieve sales success. Each letter of MIDAS stands for a step in the process:
Monitor
Interpret
Decide
Act on your decisions
Sustain
Sales transition issues also came up in a subsequent SHIFT session. One of the big challenges at many companies involves bringing in customer resource management (CRM) software. “We marketed it to our sales team as a way to get leads and cooperation and growth,” said Joe DeMarco, VP for Business Development and Technology at LINC Systems. “You need to market [the system] to your sales team. It also has to be an overall strategy that involves the entire company.”
“I think I still have a few sales reps who think they’ll outlast me,” said Margot Hart, Chief Revenue Officer at SPI. “When you can get early wins and socialize those wins, it makes a big difference. When people start to see success, it becomes contagious.”
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