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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a reduction of between 8% and 10% in the coming years. Only time will tell. Harvard's Kermit Baker sums it up this way: "I think the impact on housing is a negative. And the question is how much of a negative it is going to be. It does affect a fairly slim slice of the population, and that is upper income households and a relatively slim slice of the market geographically, too. The Houstons, Dallases and Clevelands are likely to not be hit too hard because house prices are a little more moderate there and you don't have many folks that get above these thresholds for mortgage interest deductions and property taxes, and so forth," Baker explains. "The question is to what extent is the downward pressure at the upper end of the market. If we assume that this is affecting upper-end homes and upper-end households, then what impact is that likely to have on house prices across the board, which is going to affect a household's willingness to invest in their homes – depending on how much they think that home is worth." Kitchen and bath professionals have a wealth of opportu- nity in 2018. The market is standing on strong fundamentals, particularly at the high end. Presuming this sweet spot will not last forever, it is incumbent on kitchen and bath designers to make the most of the present opportunity. Pass along the higher materials and labor prices. Hold your margins. And make plans for the future and how specifically you will attract younger millennial clients. ▪ CONTINUED (Dealers and Designers Optimistic for 2018) " We are hopeful that the current remodeling surge will continue through 2018. This is based on the number of start-ups coming in just before the end of 2017. This is usually a slow period, but business is bustling for construction to begin after the first of the year. If the current economy continues or even stabilizes at its current level, people seem to be willing to make home improvements that were put off during the recession." — Rose Edwards, President, Towne & Country Design, Inc., Yorba Linda, CA " Being a design/build firm, we are excited about the economy going into 2018. We are seeing larger kitchen, bathroom and addition projects being installed. People are investing in their home with renewed optimism that their home values are rising. We are planning on controlled growth for 2018 with a focus on increasing the bottom line to be able to give back to our team who stuck with us ever since the recession. The biggest challenge looks like it will be keeping up with demand. We are very optimistic. How- ever, we learned a lot during the downturn on how to run lean and target projects that fit our specialties." — Cindy Cipriani, V.P. of Sales, Cipriani Remodeling Solutions, Woodbury, NJ " Now that I have settled in after relocating my business this past February, I do expect sales to be better for 2018. I see people still updating their old kitchens and baths to put some more value into their property. The biggest challenge, as it has been for the last couple of years, is [figuring out] the ratio of how much to spend on advertising versus how much business it brings to your door. I do feel that 2018 is going to be a good, steady year. I have still been receiving phone calls this late in the 2017 year for people who are looking at starting projects after the holidays." — Ric Guy, CEO/President, Scotland Kitchen & Bath Designs, Inc., Essex, MD " The largest growth area for us locally is the remodeling of older homes for people to live out the rest of their lives. We are designing for living in place and incorpo- rating more safety and convenience items in our designs than ever before. Our clients want to live in their homes forever, and stay close to children and grand- children, even though this is an expensive area to live. [It's all about] comfort, convenience, beauty and safety!" — Maria Stapperfenne, CMKBD, CLIPP, Manager, Tewksbury Kitchens & Baths, Whitehouse Station, NJ " I believe '18 will continue to see this industry evolving as we have seen in past years. Base level cabinetry as well as semi and custom should see steady growth patterns. The middle of the road I see holding its own through most of calendar year 2018. Increased competition and growth from the home improvement sector will pose challenges for the smaller or regional and independent providers." — Brian Bergman, Designer, Mid-Am Building Supply, Wichita, KS " Our sales are up (even though Alaska is experiencing a down economy) and I expect sales to continue to climb. New home sales are down, and remodel is healthy and growing. Our biggest challenge has always been the same. Shipping to Alaska is not without its challenges. If we could just get the shipping issues solved, we'd be light years ahead. I feel great about 2018!" — Janice Altman, Business Development Director, Flair Interiors/Giant Don's Flooring, Anchorage, AK " I am hoping that business is better in 2018 and I am trying to remain positive, but it is difficult to do so. 2017 has not been the best year for us. The economy is improving but the customers are not willing to pay for the products and services. I truly believe that HGTV gives customers just enough information to think that they are experts from watching the shows and [so] they think they no longer need our design knowledge. They can purchase all the products, including cabinets, from online companies, so why come to us? The millennials, not all, but most, don't value quality like the prior generations. A lot of them have a 'do it now for the look and less expensive price, and worry in five years about replacing items when they fall apart' [attitude]. The baby boomers that have been our customers are also not spending; worried about retirement, they are not doing as many of the larger projects anymore. We are starting the new year with a new pricing policy and have begun carrying a less expensive line of cabinetry just to stay within our clients' budgets. I am hopeful that our new way in the new year will work!" — Julie Baum, Principal Designer/Owner, BaumHouse Design, Valley Park, MO " We had a nice increase in sales in 2017 and expect another increase in 2018. Our greatest opportunity and challenge will come in the area of installed sales. There is significant room for growth in 2018 if we can find the installers. Labor continues to be an issue and will into 2018. We also see growth opportunity in outdoor kitchens. We have found good demand and a willingness to buy quality products in this area." — Brad Hershberger, Manager, Kitchen Interiors, Evansville, IN KCMA Cabinet Sales YOY Rolling 6-month Average: Stock = 1.2% Semi-custom = 2.9% Custom = -1.7% Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% YOY % Growth Sources: KCMA; John Burns Real Estate Consulting, LLC (Data: Sep-17, Pub: Nov-17) Kitchen cabinet sales offer a clear indication of kitchen and bath activity. The growth sales of new homes for first-time buyers is showing up in more sales of stock and semi-custom cabinets. 72 Kitchen & Bath Design News • January 2018 2018 INDUSTRY FORECAST

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