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DEALERS AND DESIGNERS REFLECT ON 2013, LOOK AHEAD WITH CAUTIOUS OPTIMISM Until there is more job growth, Baker acknowledges, household formations will not increase. "We need household formations to create housing demand," he stresses. "So, it's all triggered by how healthy the economy is." REMODELING ON THE REBOUND The remodeling market didn't get hammered nearly as hard as home building did during the Great Recession, when housing starts dropped from over 2 million in 2005 to down to just over 500,000 – a loss of 75 percent. For home improvement, it was 15 to 20 percent peak-to-trough downturn, according to Baker. As a result, the climb back up has been less steep, and the news is good going into 2014. The home improvement market is likely to be back to its 2007 high by the end of 2014, notes Baker. "We're expecting pretty healthy growth, probably at a double-digit pace, through a good chunk of 2014. So, we think we'll be back to $325 billion, which is where we saw the peak of the market back in 2007," he reports. "With remodeling in general we're seeing good things happening," reports John A. Petrie, CMKBD, president, National Kitchen & Bath Associat ion a nd ow ner, MH Custom Cabinetry in Mechanicsburg, PA. "We're seeing improvement, and I think it all boils down to consumer confdence. "People are feeling more Kitchen and bath dealers and designers around the country ofered mixed reviews with regard to 2013, and for the most part remain cautiously optimistic about the year ahead. While some believe it will be very good, others are bracing for another depressed year. "Customers from fve to 10 years ago are returning, which is always a good thing," ofers Studio 76 Kitchens and Baths in Cleveland, OH. "However, there still seems to be some uncertainty about the economy, so homeowners are being really careful with their budgets." Most respondents believe 2014 will be a pretty good year, however, having experienced a reasonably good year in 2013, especially in comparison to the previous fve years. Last year, business got of to a good start for many, only to fall of in the spring and summer months. However, a strong fall resulted in higher hopes for 2014. And while analysts have cautioned that spending on discretionary remodeling jobs such as kitchens and baths will be slower to rebound than other, more necessary jobs, industry professionals surveyed tended to disagree. Many respondents noted that, not only are people beginning to invest in these rooms again, the mid- to high-end market is experiencing a comeback. Michael Krohn of Collaborations at Gilmore Home Center in Bomoseen, VT saw a slight improvement in 2013 over 2012, with business better than expected, and he believes he will see some continued sales increases based upon the economic atmosphere. "Mid- to highend kitchen sales are expected to be the greatest area of growth for us," he notes. Jefrey King of Kitchen Places Inc. in Ventura, CA, agrees. "Last year saw the return of the high-end remodeling client," he states. "Pent-up demand, less economic uncertainty, booming real estate and stock markets have fnally loosened the purse strings." He believes that 2014 is shaping up to be another good year for frms that deliver on the promise of projects that are well designed, priced and executed. And Lance Stratton of Studio Stratton Inc. in La Jolla, CA, states, "We saw a return of the mid-range project in 2013. For the past three or four years, we have only seen work in the very high end, or the entry level." Another area that is coming back is new-home construction. With the building industry picking up, dealers and designers are fnally getting the chance to turn their attention back to that part of the market – a piece that has been decidedly missing for the past few years. Brian Brenner of Builders Cabinet Supply in Chicago, IL, who saw an increase of sales by 30 percent in 2013, notes, "a lot of builders that have been dormant for years are coming back." But many designers acknowledge that the majority of their jobs are still focused on the bathroom, rather than the kitchen – a sign of the tough economy of the past few years. Kitchens were often viewed as too large comfortable and believe now is the time to invest back into their homes," he continues. "They're making that investment because home prices are improving, the value of their home is gaining back what it lost." Baker notes, however, that the composition has an expenditure in such a tenuous time, and remodeling a bathroom was a much safer choice. Newtown, PA-based Lang's Kitchen & Bath notes that the company saw an increase in bathroom projects in 2013 for the fourth year in a row. "Currently, 70 percent of our business is bathroom remodeling," states the frm. In fact, the company is increasing its showroom to support more bathroom remodeling. And respondents noted that the majority of their clients were older – customers looking to update their homes for aging-in-place or for possible resale. "I am seeing more people wanting to fx up their homes to resell in about fve years, due to retirement and people leaving the harsher climate areas," states Melody Bynon of Design Network in Placerville, CA. "Customers are still older," adds Lynne Breister of North Iowa Kitchens in Garner, IA. "The younger buyers are not back in our market area." Whatever the case, the demand for kitchen and bath design is on the increase, and that is good news for the industry. For 2014, there is hope that the business will continue to stabilize and more people will choose to update their existing homes. "Overall, there seems to be an acknowledgement that this economic environment is the new 'normal' and that there is no longer a reason to wait for things to improve," stresses Dreyer's Lumber & Hardware in Chatham, NJ. As one company concludes, "We remain optimistic about 2014 if outside factors do not hamper us – such as the Federal government doing stupid things that afect small business people like us." HOW DEALERS & DESIGNERS SEE BUSINESS CONDITIONS FOR 2014 Dramatically Better than in 2013: 12.50% Dramatically Worse than in 2013: Somewhat Better than in 2013: 56.25% 1.56% Somewhat Worse than in 2013: About the Same as in 2013: 4.69% 25.00% changed since 2005. "A lot of the remodeling boom was driven by upper-end projects – such as the $75,000 kitchen remodel or the $50,000 bath remodel. Things like that were unusually strong during the 2003 to 2007 period, and that was driven by the appreciation in house January 2014 ForResidentialPros.com | 43