Kitchen & Bath Design News

JAN 2019

Kitchen & Bath Design News is the industry's leading business, design and product resource for the kitchen and bath trade.

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AN ONGOING DEMOGRAPHIC SHIFT Harvard University's Joint Center for Housing Studies recently published a report showing that more than half of U.S. house- holds are now headed by someone age 50 or older. It supports the notion that baby boomers are currently dominating the housing and remodeling markets, and primarily responsible for driving luxury kitchen and bath activity. In addition, the report, "Housing America's Older Adults 2018," suggests that only 3.5 percent of that group have living spaces to best accom- modate the trend toward aging-in-place: single-floor living, wider doors, etc. This highlights the massive size of the oppor- tunity for needs-based bathroom modifications and upgrades in the coming years. At the same time, millennials have overtaken baby boom- ers as America's largest living generation. This group, aged 22 to 37 in 2018, is delayed in comparison to past generations Dealers, Designers Upbeat About Prospects for 2019 Kitchen and bath dealers and designers are largely optimistic about the econ- omy and their business prospects for 2019, though many are still concerned about ongoing labor shortages, rising interest rates and the impact of tariffs on the cost of products and materials. That's according to a recent survey by Kitchen & Bath Design News, which asked dealers and designers how they ex- pect their 2019 business to stack up against last year, as well as what they see as the market's greatest challenges and opportunities going forward. "Business in 2018 was amazing and I expect 2019 to be even better," enthuses Ebony Stephenson, CAPS, of Designs by Ebony in Newport News, VA. She continues, "Having such a unique niche in my market makes my opportu- nities endless. Clients are coming in more tech savvy now, knowing what they want. I take full advantage of that while it may deter other designers." Indeed, she notes, "I feel that my biggest challenge [in 2019] will be just simply trying to keep up with all the incoming work." Barbara Brown of the Washington, DC-based Barbara Brown Interiors con- curs: "I expect business to continue growing in 2019. We are seeing a renewed client interest in remodeling and updating their existing homes." "I project that I will do a little better than this year – I continue to get calls and emails for kitchen renovations and I have three big projects starting in early 2019," says Laura Medicus of Laura Medicus Interiors in Denver, CO. "Most of these kitchens also include entry/mudroom updates and master bathroom renovations. I am feeling optimistic for 2019 and my biggest challenge is figuring out which projects to say no to. That's a good challenge to have." Michael Isherwood of Sagent Builders in Westchester, IL is also feeling good about his firm's economic prospects. He notes, "Going into 2018 we made many changes to our SEO, with the expectation of seeing a 23% increase in sales…we exceeded that with a 33% increase. We are now in the fourth quar- ter and see many opportunities with bigger projects, increased calls and better leads. All that said, 2019 will be a year for us to go all in with a goal of 28% in increased sales." However, not everyone saw 2018 as a banner year. Chris Whitney of Whit- ney Wood Work in Amagansett, NY is "hoping [this year will be] an improve- ment over '18," adding, "We're apprehensive about the tariffs and what many are predicting concerning a market correction." Nancy Kinkead, Kinkead Construction and Design in Billings, MT also sees some caution signs ahead. She states, "I have some concerns about 2019. We are building a new house [and] we saw a real increase in the cost of materials in this build," citing "a big difference" between the initial bids and the actual cost. She notes that, between rising interest rates, tariffs and the like, "I am seeing red flags of a real slowdown in the housing market." Scott Pearson, Pearson Building Pursuits in Davenport, IA states that he expects 2019 to be "very similar to 2018 with the number of new construction starts and remodeling." However, he also admits that "remodeling would be stronger for us if the workforce had more tradespeople…right now, it's taking longer to finish jobs." And Ingrid Fraley of Design Services Inc. in Gaithersburg, MD says, "Short- ages in labor (skilled availability) and increases in cost of materials may affect business opportunities for 2019, with projects being put on hold or delayed." A slew of statistics about the market have also left some industry pros uncertain about what the future holds. According to Laure Lake, RID, NCIDQ, Floor to Ceiling, in Winter Garden, FL, "Recent reporting on both housing sales and building starts has been alternately encouraging and then alarmist. It appears that there is a shortage of affordable housing with new construction focusing on the higher-end purchaser." However, she notes, "Reading between the lines, I am encouraged for the renovation market with the existing invento- ry of resales and hope to be seeing overall growth in 2019!" DEMOGRAPHIC CHANGES Changing demographics are also impacting the economic landscape, with some dealers and designers shifting their focus toward millennials buying their first homes, while others see greater potential in remodeling for " Half of the spending in the country is households 55 or older, so it is a big segment and a growing segment of the market." Kermit Baker, Harvard University's Joint Center for Housing Studies Based on Burns' proprietary demographic models, the 55+ cohort experienced the most household formation growth in 2016. Solid growth for the 25–39 age range supports builders' pivot to entry-level housing. Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC (Data: 2016, updated quarterly) — Pub: Aug-18 40 Kitchen & Bath Design News • January 2019 2019 INDUSTRY FORECAST 500 400 300 200 100 0 -100 -200 -300 <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75+ 271K 418K 188K 268K 97K -263K -14K -165K -95K 218K 81K 128K Household Formation by Age 2016 YOY change, thousands

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