Kitchen & Bath Business - January 2018 - 22

Industry Outlook

employment growth in 2017 would have exceeded
the prior year's growth.The unemployment rate had
fallen to lows not seen in nearly two decades.
But the strength in homeowner remodeling
is not mirrored in improvements to rental apartments. Even though rental rates rose a remarkable
8 percent last year, the vacancy rate for rental apartments was nearly 1 percent higher than a year ago.
There were 7.5 percent vacant apartments in 2017
Q3 compared to 6.8 percent in 2016 Q3.
For new construction, however, the image is a
little different. We expect further growth in the
construction of new houses,concentrated primarily
in single-family housing.

for 2018. Our economy is pretty strong, interest
rates are reasonable, and experts predict continued growth in homeowner improvement spending by an average of nearly 2 percent per year
through 2025.
Fiser: There is still optimistic growth into the future

New Housing Construction, 2016-2018 - Thousands of Units
YEAR

SINGLE
FAMILY
Units

% Chg.

MULTI
FAMILY
Units

% Chg.

TOTAL

Units

% Chg.

2016

782

9.4%

392

-1.3%

1,174

5.6%

2017

850

8.7%

360

-8.2%

1,210

3.1%

2018

950

11.8%

350

-2.8%

1,310

8.3%

Two factors driving improvement in this sector
are the rising mobility among homeowners, as well
as the rising homeownership rate. Both fell sharply
after the 2007-09 recession but have been recovering gradually over the last couple of years.
On the multifamily side, the picture is different. While in the early post-recession years there
was increased demand for rental units, builders
may have overreacted and built too many luxury
units, which has led to an increase in the number
of vacant units. New units won't be built until this
inventory falls to more acceptable levels and builders move to construction of lower-priced units.
Miller: Growth has been pretty steady for the last

few years, and it will continue to grow slow and
steady through 2018. The residential remodeling market was the biggest single segment of
construction by overall volume the past year,
and the overall outlook continues to be good

for the housing market and the kitchen and bath
remodeling part of it. Last year was the best year
ever for the residential design market. According
to the ASID Interior Design Billings Index, for
21 straight months firms have recorded an increase or no decrease in design services compared
to the previous month. The data indicate that we
will go in a different direction in 2018, but there
is some expected growth. Year over year back to
2015, we have been seeing growth in this industry.

MANUEL GUTIERREZ

Consulting Economist for
the NKBA

What factors will affect this outlook?
Gutierrez: An improving economy that has been
building strength over the last few years is the primary factor. Additionally, the changes in regulations implemented by the Trump administration,
both in reducing the number of new regulations
and revising the existing regulations to assess their
economic impact in a more balanced manner, will
begin to have an impact on business hiring and
profitability.
[As of press time], we didn't know the eventual fate of the tax reform bill. Many of its features
would be beneficial to businesses and consumers.
But some, such as the elimination of the mortgage deduction and state property taxes, will have
a negative impact on the housing market.
Finally, even though wages have risen barely
above inflation rates, the median household income has risen substantially over the last couple
of years. Additionally, both stock price gains and
home price increases naturally drive the wealth of
households. This includes wealth in the form of
housing equity that some households opt to take
out for expenses that may comprehend such things
as home remodeling.
Dietz: In terms of remodeling growth, a major

factor is the decrease of the population mobility
rates. People are staying in their homes longer,
which means demand for structural changes and
improving-in-place design is up.
In terms of a potential remodeling decrease,
the labor market is not strong enough to accommodate the aging housing stock that needs 
improvement. It is critical for our industry to

Kitchen & Bath Business / JANUARY 2018 / KBBONLINE.COM / The official publication of KBIS (KBIS.com)

TOM MILLER, MCR, CKBR

President of the National
Association of the
Remodeling Industry (NARI),
2017-2018

http://www.KBBONLINE.COM http://www.KBIS.com

Kitchen & Bath Business - January 2018

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