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03/09/2021

Kitchen and bath market moves ahead in Q4

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A kitchen from New England Design Works.

Kitchen and bath sales strengthened in the fourth quarter and appear to have returned to pre-pandemic levels.

The Q4 2020 Kitchen & Bath Market Index (KBMI) increased 2% above the third quarter of 2020 and 4% compared to the fourth quarter of 2019, the National Kitchen and Bath Association (NKBA) and John Burns Real Estate Consulting reported.

Retail sales increased 7.9% from last year, followed by manufacturing rising 5.5%, building/construction growing 3.8%, and design services up 2.4%.

The KBMI reached a rating of 65, representing a third consecutive quarter-over-quarter increase. The index stood at 61.9 in Q3 2020 and was below 50 in both the first and second quarters of last year. Scores above 50 indicate expansion and scores below, contraction. 

All indicators of the report have improved over the last several quarters — with kitchen and bath market respondents ranking current conditions at 59.8; future conditions at 72.7; and the health of the industry (measured on a scale of one to 10) at 7.1, just below the pre-pandemic 7.2 registered in Q4 2019.

Supply-chain disruption, cost of materials, concerns around keeping COVID-19 under control and availability of skilled labor are the top concerns of industry professionals. 

More than half (56%) say COVID-19 has worsened the pre-existing labor shortage by fueling demand, with 58% reporting their pipelines are larger now than at the same time in 2019.

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Organic and natural finishes are featured in a kitchen from Estee Design.

“We’re seeing an incomparable surge in homeowners looking to rearrange floor plans, tear out complete kitchens, baths and other rooms to make space for increased activity within the home, and generally create a space that better suits their evolving needs,” said NKBA CEO Bill Darcy. “Our industry’s greatest challenge will be operational, as our members aim to meet growing demand from homeowners with an unmatched appetite for remodeling.”

The latest trends identified by the NKBA include a shift back to larger projects, including expanding and rearranging floorplans or creating dedicated offices, to increase home functionality. According to the NKBA, this recalibration of priorities is contributing to anticipated business growth across sectors, as more complex jobs require a level of professional help not seen in 2020’s DIY boom.

Pandemic circumstances are actually driving demand to 60% of kitchen and bath companies, with members reporting that consumers are beginning the remodeling projects they planned while sheltering in place in 2020, the NKBA said.

Additionally, there is a higher demand for lower-priced products and finishes while homeowners also seek out wellness design, given the focus on physical and mental health spurred by the pandemic.

Each sector of the kitchen and bath market is impacted by current demand in different ways, though all report supply-chain disruptions as a significant, negative impact of COVID-19 on their business. 

Retail sales are seeing strong growth across all price points but wood items, including cabinets,  are under inflationary pressure due to the lumber market. 

Regardless, retailers have the most positive outlook on the industry, ranking the KBMI highest of any group at 71.7, according to the report.

Demand continues to exceed supply for manufacturers, however, most notably in cabinetry and appliances. 

Building and construction firms have reported cancellations and postponements are declining, with more than half (58%) reporting zero in Q4, compared to 49% in Q3. Builders are more likely to report supply-chain disruptions as significantly impacting their business (23%) compared to other sectors.

Half of designers said demand for future projects is higher than it was pre-COVID, while consumers’ finances have less of a negative impact as economic confidence has continued to improve over the last several quarters.