Early this month, the National Kitchen & Bath Association (NKBA), in conjunction with John Burns Real Estate Consulting, released the Third Quarter Kitchen & Bath Market Index (KBMI), which shows positive growth in the remodeling industry. Scores that are above 50 indicate growth while those below show decreased activity, and the score for Q3 2019 was 65.4. This is consistent with the Q2 2019 score of 65.7.

This index looks at the “economic pulse” of the kitchen and bath industry, and it is also used to gauge larger macroeconomic conditions, such as consumer confidence and discretionary spending.

According to the study on which the index is based, the current major concerns of the industry are as follows:

• Rising cost of materials
• Customer budgets
• Fear of recession
• Labor costs

In addition, 54 percent of NKBA members have cited that tariffs have had a moderate, high or significant financial impact to their businesses, and manufacturers were hit hardest with 59 percent reporting financial impact. One in three members have had to raise prices on products and materials due to tariffs.

“The KBMI arms consumers and our nearly 50,000 industry members with the knowledge they need to best understand the remodeling market and economic climate,” said Bill Darcy, NKBA CEO. “We’re pleased to find the industry is still growing and that future conditions are optimistic. The KBMI also sheds light on industry challenges, such as the labor shortage, which we hope to support through our NextUp program by educating youth on the many career opportunities available in the kitchen and bath space.”

“Our partnership with the NKBA allows us to monitor the kitchen and bath industry, which is a valuable housing indicator for our clients,” said Todd Tomalak, Senior Vice President of Research for John Burns Real Estate Consulting. “Remodeling spending is shifting as fewer homeowners choose to move and instead improve their existing homes.”

Following are several other key takeaways from the Q3 report:

• The Q4 outlook is optimistic yet cautious. Experts forecast a KBMI score of 61.7.
• Sales growth is expected for the rest of 2019 at a rate of 3.5 percent for the full year although earlier predictions were at 4.7 percent and 5.4 percent.
• The kitchen and bath industry is stable.
• Products made in the U.S. are booming even though one third of members have had to raise prices. Another third of NKBA members have stated that they’ve been offering different products because of trade issues, which has increased sales of domestic brands. Higher-quality U.S. products are now in the same price range as entry-level imports, especially regarding quartz countertops.

The International Surface Fabricators Association (ISFA) published its annual Countertop Industry Outlook for 2016 in its magazine Countertops & Architectural Surfaces. The ISFA forecast is the only one of its kind in a print publication (although it can also be read online), taking into consideration that it is not specific to a single type of countertop material. The forecast is researched and written each year by the editor of the magazine, ISFA Communications Director Kevin Cole, who predicts fabricators and others involved in the countertop industry are “poised for another year of growth.”

This is expected to be the fourth consecutive year of growth in the countertop industry since the economy recovered from the recession that began to hit hard in 2008. According to the 2013 industry forecast, the economy was still a bit sluggish but was beginning to look up, and since that time, most industries and the economy in general has improved.

Because there are very few sources available that specifically focus on countertops, the ISFA Industry Outlook is based on data that supports countertop demand, which begins with the general economy and then looks more closely at allied areas, such as U.S. housing starts data, nonresidential building construction, home improvement product sales, remodeling predictions, cabinet sales and others. If you are not a member of ISFA or are not otherwise receiving their quarterly publication, we strongly suggest you subscribe online. Subscriptions are free to qualified individuals and organizations in the United States, at least at the current time.

ISFA’s industry forecast has been anchored for the last four years by the Countertops study conducted by The Freedonia Group. The latest report is 389 pages in length and forecasts the state of the countertop market through 2024. According to this report, demand for countertops is expected to increase by 4.2 percent annually through 2019, which values the industry at about $29.3 billion.

The Freedonia Group also expects the share of laminate countertops will fall in terms of square footage in comparison to other materials, yet continue to account for more than one-third of the market through 2019, and demand will rise by 3.4 percent per year through 2019.

Natural stone is predicted to make the largest gains as low-cost imports enter the market and prices continue to drop. However, the forecast for total annual sales by square footage has dropped from 5.9 percent to 5.3 percent for the next few years.

Also according to the report, solid surface will hold steady as the third most-popular countertop material in terms of square feet after natural stone with demand predicted to rise by 1.2 percent, and engineered stone holds the fourth spot and is expected to grow by 5.8 percent. The fifth spot is occupied by the generic cast polymers category, and it is expected to increase by 1.3 percent.

Tile follows cast polymers in expected popularity, and the segment is expected to increase each year over the next several years. Finally, the forecast shows the Other Materials category, which includes concrete, metal recycled materials and pretty much everything else will increase by 10.1 percent through 2019.

This year, the 238-page “2015 Natural and Manufactured Stone Product Industry Report” published by Catalina Research in December 2015 complements the Freedonia report. According to Catalina Research, natural stone ruled the countertop market in terms of dollars (versus square feet, which is what Freedonia uses as a gauge, with 43 percent of the share in 2015 while laminate was at 18 percent and engineered stone at about 16 percent.

When it comes to residential construction, housing starts have increased by 10 percent at an estimated 1.1 million after breaking the million-unit mark in 2014, and starts for multifamily dwellings have increased by 15 percent since 2006. However, starts for single-family homes are less than half they were at the peak of the housing boom.

Another resource used for the ISFA forecast is the latest Construction Outlook from FMI, a leading investment banking and consultancy firm for the construction industry. Highlights of this edition, which focuses on non-residential construction, are as follows:

• Four out of five non-residential construction categories have grown for five years straight.
• Growth in lodging is centered on upscale properties, and green construction is becoming more common.
• Office construction has increased by 19 percent from 2014 to 2015.
• Food service and beverage establishments are the fastest growing segment in commercial construction.
• Construction of healthcare facilities continues to remain in flux with most work going toward renovations and additions.
• Increased attention to green building technologies will be apparent in the academic sector.

All in all, the 2016 ISFA Countertop Forecast provides a pretty in-depth and solid reasoning with substantial evidence for its positive outlook for the industry.

Chart courtesy of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University – Click To Enlarge

According to the firsthand accounts we’ve been hearing at CountertopResource.com since our last report, the state of the remodeling industry is incredibly positive. Both contractors and related subcontractors, including countertop fabricators and installers, are enjoying a steady increase in business and in profits. However, a few reports show that the boom may be slowing, and business owners may be facing new difficulties going into 2016.

NARI Says Growth Slowing

In early October, the National Association of the Remodeling Industry (NARI) released its industry analysis, Remodeling Business Pulse (RBP) for the third quarter of 2015. The RBP tracks current remodeling conditions and outlook, and it is professionally organized with data and research by the marketing firm Consumer Specialists.

The report revolves around a final rating that is supposed to be a conglomerate measure of the current conditions for remodelers. The rating is on a scale of one to nine, and a rating of five or higher indicates growth. The RBP rating for the third quarter 2015 was 6.03, which is a sure sign of fair growth. However, this is a decline from the second quarter rating of 6.48.

Breaking the report down into its individual components, declines were measured nearly across the board:

• Inquiries declined 4.6 percent.
• Requests for bids declined 4.0 percent.
• Value of jobs declined by 4.6 percent.
• Bid conversion remained unchanged.

The analysis provided by NARI states that the leading factor driving growth was postponed projects followed by an improvement in home prices.

“Our businesses are becoming stronger, and that is good, but not as fast as it once was. We are adjusting to slow sustainable growth and are less optimistic, more realistic about what the future will bring,” said David Merrick of the NARI Strategic Planning & Research Committee. “Our customers are being careful about budgeting and taking on bigger projects so leads may be down a little, but the leads we are getting are more focused and on target and budget oriented.”

The future outlook in the RBP showed a picture similar to the analysis of current conditions. The rating for the outlook dropped from 6.07 to 5.79. Fifty-three percent of respondents in the survey stated they see growth in the future while 15 percent they are predicting a decline in business.

Houzz Renovation Barometer Falls

Even though the Houzz Renovation Barometer for quarter three has declined from the previous quarter, the company states that confidence remains high among home renovators. The analysis is broken into six categories: architects, designers, general contractors (GCs) and remodelers, designers-builders, specialty builders-renovators and specialty landscapers.

According to the report, industry optimism by GCs & remodelers fell six points from 78 to 72 even though Houzz predicted only a one-point decline in the last Renovation Barometer. Specialty builders-renovators saw a drop of four points from 77 to 73, but Houzz predicted the category would rise two points to 79.

Even though these drops are quite significant, Houzz focused on the positive aspects of the report. The following stats reflect the year-to-year numbers:

• New business inquiries increased from 63 to 74
• Number of new projects increased from 66 to 74
• Size of new projects increased from 60 to 69

All of these indicators of new business growth fell on a quarter-to-quarter basis, but this may be attributed to the annual winter slowdown.

LIRA Predicts Rise in Remodeling Spending

In October, the Leading Indicator of Remodeling Activity (LIRA) was published by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. LIRA was developed to estimate national spending on home improvements for the current and three subsequent quarters.

According to the third-quarter report, home-improvement spending will fall from $149.4 billion in the third quarter to $148.3 billion in the fourth and $146.9 billion in the first quarter of 2016. However, by the second quarter of 2016, spending is expected to rise to $154.5 billion, which is an increase of 6.8 percent.

The Freedonia Group, a research firm, has released a new report titled “World Countertops.” The 430-page research compilation predicts global countertop demand will rise 4.2 percent per year to more than 5.4 billion sq. ft. in 2018. According to the release, the increase is attributed to improved building construction activity throughout the world and modernization of developing areas that are constructing numerous structures, both housing units and nonresidential, to accommodate the needs of growing populations. The report also states that in 2013 solid surface accounted for more than 40 percent of countertop demand in China, and the Asia/Pacific region accounted for 47 percent of world demand, the largest market for countertops that same year. This trend is expected through 2018. It also lays claim that while laminate made up almost half of all countertop surfaces in the United States in 2013, only 2 percent of countertops were laminate in China.

Regarding North America, the report states that it was the second largest countertop market and that gains will continue because of continued recovery in U.S. building construction and growth in single-family housing completions.

Western Europe is also expected to benefit from rebounds in new housing construction turning around the declines experienced from 2008 to 2013.

You may also be interested in this countertops industry forecast put out by ISFA.

A few weeks ago, the International Surface Fabricators Association (ISFA) published its annual Countertop Industry Outlook for 2015 in its magazine Countertops & Architectural Surfaces. This forecast for the coming year is the only one of its kind published openly that we are aware of, and it is not specific to only one kind of surfacing material. It is researched and written by the magazine’s editor and ISFA Communications Director Kevin Cole, who predicts fabricators and others involved in the countertop industry can expect “another year of continued growth.”

This is expected to be the third year in a row of industry growth after the economy began to recover from the Great Recession. According to the 2013 industry forecast, the economy was still a bit sluggish, but was beginning to look up. Since that time, growth has continued in the general economy and most industries.

Because there are very few sources available that specifically focus on countertops, the Industry Outlook is based on data that is indicative of countertop demand, beginning with the general economy and then looking at more closely allied areas, such as U.S. housing starts data, nonresidential building construction, home improvement product sales, remodeling predictions, cabinet sales and more. If you aren’t ISFA members receiving this publication, we strongly suggest you sign up for it. Right now subscriptions are free to qualified individuals in the United States.

Taking all of the sources into consideration, the forecast from ISFA has been anchored for the last three years by a 382-page report from The Freedonia Group offering predictions on the countertop market through 2022. According to this report, demand for countertops in the United States is expected to increase by 5.1 percent through 2017, spurred by building construction, single-family home completions and a relaxation in credit requirements for remodeling loans.

According to the Freedonia report, the demand for laminate countertops is expected to decrease from a 60 percent share of the market 10 years ago to 47 percent by 2017. Natural stone is predicted to make the largest gains with quartz surfacing/engineered stone coming in a close second. In addition, countertops made of “other materials,” such as concrete, metal and recycled products, should grow by 7.2 percent per year through 2017. It also makes predictions about tile, solid surface and other cast polymers.

Other specific factors that led to the favorable outlook for 2015 include the expected growth of the national GDP of 3.1 percent and increase in housing starts from 924,900 in 2013 to more than 1 million in 2014. In addition, predictions for nonresidential construction are up across the board.

However, beyond the ISFA forecast, one of the strongest indicators of a great 2015 for the countertop industry comes from anecdotal evidence provided to us by our general audience, which includes thousands of fabricators across the country. Talking with fabricators at KBIS and TISE this year and communicating with many others online and by phone, we have heard very little bad news. Most of our readers cannot deny that business is up, and many are expecting growth to continue in the future.

We are currently working to uncover specific information about the countertop industry (as well as how we are doing serving you) through our own Countertop Industry Survey, and we would love to hear what you have to say. To help you make our data as complete as possible, we invite you to take the survey and have your name entered for a drawing to win one of two $250 gift certificates to Best Buy. You can start the short survey by clicking here now.

The International Surface Fabricators Association (ISFA), which is basically the countertop association, just released its latest issue of Countertops & Architectural Surfaces magazine and it contained a great forecast for the countertop industry for 2013. The forecast, which as far as we know is the only one of its kind published for the countertops industry, takes an in-depth look at what this year, and years beyond, will look like.

The article not only provides a generally summary for the basic economic outlook for the United States, but also digs deep into areas specifically affecting the countertop industry, such as the housing market, both the residential and nonresidential builder markets, home improvement and remodeling and cabinetry. The author provides a lot of good statistical information from a number of resources to back up the forecast, which provides a relatively good outlook for the industry, including specific numbers for the countertop industry itself (provided by The Freedonia Group).

To sum it up, the article points out that the general economy is still a bit sluggish, but when you look at the specific industries that affect the countertop market, the numbers are definitely looking good.

All in all, this great countertop industry resource  (beginning on Page 24 of the magazine) is a must-read for anyone whose business is tied in with the countertop industry. Kudos to ISFA for providing such a report.

Far from an optimist, particularly facing what is now being termed as “The Great Recession,” I have to say all of the signs are pointing to a more robust housing market in the works, which ultimately bodes well for the countertop industry. And it’s about time!

According to an article that ran on ForResidentialPros.com in Sept., the second quarter of 2012 showed positive annual growth rates, according to all three headline home-price composites, for the first time in two years. And, as the headline of a Mainline News article touted, National home prices see largest yearly increase since 2006, many agree that the prices homes are fetching on the market are improving. This is a major sign the housing market is on the road to recovery.

Seeing people willing to pay more for homes, indicates that they are buying again, which not only may mean improvements to these properties in the works, but also indicates the number of available homes on the market is lower.

Another indicator is the lessening number of foreclosures, which have been flooding the market with cheap property. According to an article from Reuters issued Oct. 11,  U.S. foreclosures are at their lowest point in 5 years, another good sign that the housing market has hit bottom and is rebounding.

That means we will likely see an uptick in new home building.

The National Association of Home Builders’ “Improving Market” indicator is also at a high, according to a recent report, which concurs with the other evidence.

So those in the countertop market who had been leveraged in the builder market when it dropped off a cliff in 2007, may now want to cautiously put a toe in the water and see if they can begin to get additonal business there.

It is doubtful we will see a level of activity near the peaks around 2006 any time soon, but with the unemployment rate now under 8 percent, these positive signs for the housing market make it difficult to be too much of a pessimist about 2013.