Kitchen & Bath Design News

JAN 2018

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

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homes. They are almost twice as likely to buy a new home. That is why builders are seeing volume. And then we see an increased incidence of young people buying older homes, like over 45 years old," says Tomalak. "And a lot of those homes need a ton of work done." Initially, millennial buyers and improvers are composed of a high percentage of DIYers. But professionals are increasingly in the picture. They tend to focus on high-end features but are less devoted to name brands. The implications of these prefer- ences will almost certainly play out in the coming years in an industry dominated by premium brands. TAX INCENTIVES OFFER HOUSING LESS SUPPORT Several key changes have now been implemented by a new tax law. Higher standard deductions will certainly mean fewer homeowners choosing to deduct mortgage interest and home equity interest going forward. Loan limits for those who do itemize their taxes have also been slashed. And while there remains positive upward pressure on house prices due to strong fundamentals cited above, the new tax law's impact will exert downward pressure on prices. The National Association of Realtors is suggesting that home prices nationally could see Dealers and Designers Optimistic for 2018 Dealers and designers are feeling positive about 2018, according to a recent poll by KBDN, which looked at projections for business in 2018, along with key growth areas and potential challenges. Of the 100 dealers and designers who responded, the outlook was overwhelmingly positive, with many stating they have already booked strong business for 2018, and expect to see double-digit growth in this year as well. Key growth areas cited include remodeling, particularly for aging in place, and safety and convenience features, as well as outdoor kitchens, counter- tops and cabinets. While existing-home remodeling was cited by a number of those polled, many were also optimistic about growth in new-home construc- tion projects. As far as challenges ahead, labor shortages topped the list of those polled, along with competition from online companies, a younger, more price-sen- sitive demographic, unrealistic expectations among consumers caused by DIY home shows, increased competition from the home improvement sector and the possible ramifications of tax changes, particularly with regard to the mortgage deduction. BELOW ARE SOME OF THE RESPONSES FROM DEALERS AND DESIGNERS POLLED. " I'm already experiencing the upturn in business toward the end of 2017 and expect it to continue to increase throughout 2018! I'm normally finishing projects at the end of the year, and this year I'm starting new projects in December with the expected end dates in early 2018. I'm thrilled about the increase in business. I believe that the biggest growth opportunity in the coming year is complete home remodels. Potential clients are feeling the economic stability and feeling confi- dent that the investment they make in their homes will result in a higher sale price when they sell. I am hoping that the biggest challenge ahead is how to complete all the work that will be coming my way! That would be a wonderful challenge that I will meet with a smile, and maybe an extra employee. I'm feeling very optimistic about 2018. The calls that I'm receiving are from people who 'want' to remodel their homes; not those who 'need' to remodel. The climate feels much like pre-2007, and that's a wonderful feeling!" — Donna Marie Mushinskie, CID, D M Designs, Yucaipa, CA " Sales have been like a rollercoaster the last several years, but we are hopeful that 2018 will show an increase over 2017. I believe cabinet and countertop sales will continue to be strong. We are cautiously optimistic about 2018." — Diane Augustus, Business Manager, Advanced Kitchens, Ellington, CT " 2017 has exceeded our projections, with 35% growth over 2016 and higher grossing projects, and we are anticipating a [similar] increase for 2018. With the launch of a new website and marketing campaign set for January 2018, we look forward to exceeding this year's projections. That being said, we continue the struggle with DIY shows and the way they portray costs for projects. For us, it's all about educating our clients and giving them the tools they need to make an informed decision before they begin the project." — Michael Isherwood, Owner, Sagent Builders, Westchester, IL " Here in central Ohio, we are fortunate to have a good economy and homeowner optimism. We see a large demographic group approaching the age to start fam- ilies, which drives sales in residential neighborhoods. We predict more growth in kitchen and bathroom upgrades as first-time buyers enter the market and 'next home' buyers customize and upgrade homes from the '90s." — Harold Davis, President, Creative Services, Ltd., Columbus, OH " I do expect business to be better than 2017. I am working toward more networking with contractors and touching base with more retail customers as well. I see the biggest growth opportunities in remodeling existing homes. The biggest challenges ahead for me will be in educating my customers in the better quality products that are out there versus the 'cheap, cheap, cheap' mentality that a lot of customers cannot get out of their heads. Overall, I feel very optimistic about business as we go into 2018." — Oscar Talavera, Owner, T&B Cabinetry and Design, LLC, El Paso, TX " Growth continues at a rapid pace in our area, the Pacific Northwest. Home prices are increasing. Existing homeowners are choosing to remodel rather than move. Our tech industry continues to attract new people to the area. New home construction is booming. The biggest challenge ahead for 2018 is in finding good, skilled labor to meet the demand." — Diane Foreman, Lead Designer, Neil Kelly Design & Remodeling, Seattle, WA " We are feeling conservatively optimistic about business for 2018 and believe that it will be at least as good as 2017. The biggest challenge and growth opportunity for us here in the Midwest as remodeling professionals is always new construc- tion, which tends to pick up when the economy is good. We have plenty of land to build new homes on here! Another issue and challenge is the heavy influence of the oil economy. Barrel prices are higher now than in the last three years but still not ideal enough to promote good profits that trickle into our industry. Based on 2017 numbers, though, we are feeling very good about the potential for 2018." — Brenda Helms, Owner/Designer, Edmond Kitchen & Bath LLC, Edmond, OK Home Renovation Priority: Use of HELOC Money Sources: TD Bank Survey: 2017 HELOC Index (Data: Mar-17, updated annually) A TD Bank survey shows that kitchens and baths are where borrowers tend to spend their home improvement funds. 35% 22% 9% 8% 7% 6% 5% Kitchen Bathroom Add a Room Other Backyard Basement Living Room 70 Kitchen & Bath Design News • January 2018 2018 INDUSTRY FORECAST Continued

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