podcast: insights confident decision-making. Welcome to another episode of The Decisive podcast. I'm your Global Intelligence and Analytics at S&P Global Market Intelligence. Joining me is my S&P Global Market Intelligence colleague, Scott Hazelton, Consulting Director responsible for our bespoke construction and home improvement work. And we're going to talk about the market for home improvement. Scott, welcome back to the podcast.
Scott, you're getting ready for the Home Improvement Insight which is one of my favorite cities. and what kind of insights do those attendees expect to get.
is not a PowerPoint vacation. Typically, it's analysts from marketing from manufacturers, home improvement stores, for example, chains. And then the speakers are typically from industry specialists that give a marketplace. What from that is what drives the market again and again, but not the same story. So what drives the market for a consumer looking for What remodeler, what facilitates brand loyalty for both those marketplaces, home or demographics like aging
for example. There's various topics that can be improvement demographic segmentation characteristics.
So what are the main factors that influence spending on home improvement,
There are the classics: interest rates,
Scott?
to major home household net worth, cashing out equity of some sort or channels. So those are traditionally the big ones. Consumer confidence, of course. You have to have some degree that also nice to have because so on it. Government incentives can be part of this, IRA, the Act, which really had a high energy component to it, solar installations, wiring your So nearer-term trend drivers. of installing software and that
there contributing to the market. Maybe what it is that we improvement? Does it have to be a major renovation, Scott? Or can it be as simple as a new coat of paint?
Yes. It can paint. anything that maintains or extends the value remodeling. faucet, that would be there's maintenance that has to get done
improvement I've done in a while.
improvement item? I would say, in maintenance, but lawn are becomes the defining mechanism like when I bought an electric chain saw, which was meant Because if I the home value drops. Massachusetts on electric some of powerful, and they're not as long as a conventional there.
next home improvement. With that definition in mind, what is the current state of the home improvement market, Scott?
as But has been, it seems like pre-COVID. We straits, of tailing off there. And you in spending. So right now, a little bit challenging, but a strong past and I think a pretty
Let's talk about how these home improvements particularly in the high interest rate environment.
by high compared something. But you're right, interest rate environment. And quickly, probably September for 25 basis points and think twice They're you've something by far. You can fund it from other assets, which you've got life do it: birth care, in which case you may have investment.
What about properties like hotels, Scott?
Yes. Typically, it's reasons. One is Multifamily housing, relatively easy to convert hotels to convert an office so properties. We've now had a pretty good recovery arguably too hotel construction year has some very it's that recovery of construction 2006 2007 and 2008. So we have properties magical roughly 15 to 20 years old, that's when renovations to buildings.
maintenance will you have a spending of more than of a building's value, depending upon the local regulatory authority, trigger other spending. So if you want to refurbish all required to upgrade your electrical system or your know, IRA. You might be required to upon multiplier effect on commercial buildings that
there for buildings that are residential in nature but also commercial in nature. Now as you hinted at earlier, our current expectation is that the Federal Reserve will pivot and year with additional cuts sprinkled throughout 2025. What impact might that have on the home improvements people make and that sales mix that you talked earlier?
So we have a bit of a logjam in the housing market in that housing starts are relatively tame. New tight inventory. -- Existing especially of existing homes, which tends to drive a lot of You when not brand new. stalled with come down, we do improve affordability somewhat, and you get a little more churn in the marketplace, to have.
to trade down but right that has to get unleashed improvement spending has can't move or you then you have to maintain the What we've which is systems that just need to be maintained, so windows, to maintain the the home, to keep it in a discretionary spending on cabinets that housing market. As see those trends house remodels and a little share of total of the roofing, siding,
windows, doors. But what this means is brave souls do better than the consumer market in the past couple of years.
I particularly the labor picture in a minute. But first, I want to ask you about the cost and availability of materials for home improvement. I think when we first spoke about home improvement a couple of years ago, were really high, for example. Has that normalized post pandemic, the cost and availability of materials...
answer. materials In fact, in deflation where you had lumber well but they were in 2019. So yes and no. The era behind us. But corrections are not complete to never will be in the market. And recovered we actually closed mills, Canada that COVID would cramp housing, supply constrained, so that we had a whipsaw with lumber that didn't occur as badly with other materials.
2019. You know, it was funny, for the tells you that lumber has been somewhat prices, have the same did.
Yes. Wow, that definitely illustrates hasn't been quite what one might think. So let's go back to that labor question. about the need for skilled labor and construction and home improvement. Have there been any changes to worth highlighting since we last spoke, Scott?
It's better. We had home contractor. But by the same token, they're still busy. this environment and painting that could be a longer than for IRA. The conversion to heat supply right now. super-heated atmosphere a hot constraint and availability of still labor is contractors take a lot of time to in many of the trades manufacture new even over a year; it takes 2, supply of professionals and of but it's still a tight market for labor.
All right. So Scott, let's talk about some of the indicators that businesses should be monitoring as they think about positioning themselves in the home improvement market. What should they be looking out for?
we've inflation to adjust markets to adjust. And those 2 numbers. year, for the most unemployment trending up a little bit and point where we think policies, you back or not, depending upon what happens. At this watching what happens with consumer is obviously a good thing for borrowers. On the residential market, you could basis typically with
can do it again and again. Lowering rates at a gradual pace will feed through home improvement relatively quickly because financing, whereas on the corporate side, don't cheaply. points before they start
Scott, I could probably talk with you all day about home improvement and many other things time to wrap up our conversation on improvement. Any final thoughts for listeners?
challenging 2024. And our view as a company of the economy relatively subdued there think, on growth environment. But rates will help out forecasting double-digit growth for home improvement spending. going to have conditions that will decline to growth over the next couple of years.
Thank you so much, Scott, for taking the time to share your insights with us. I hope you get a lot out of the Chicago, and that wraps up the episode of The Decisive podcast until next time.
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