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If you’ve been following the real estate market (or just Zillow-surfing) you already know that the market is still red hot. One of the contributing factors is the seismic shift in how people worked. Work from home became mainstream, and a great many people not happy with their surroundings realized “I don’t have to stay here anymore”, packed up, and moved to more desirable places.
Work From Home Changed Everything
The ‘work from home’ movement was one of the many effects of the Covid-19 pandemic. Another effect was a skyrocketing demand for building and home improvement supplies. Americans stuck in their houses with time on their hands wanted (or needed) to upgrade their houses to better work and care for their families. Home improvement and repair spending grew by nearly 3% to $420 billion in 2020, per a recent study by Harvard University’s Joint Center for Housing Studies (JCHS). One product that exploded in price was lumber: Lumber futures more than doubled in 2020, climbed to a record settlement of $1,670.50 per 1,000 board feet on May 7, 2021, then hit an intraday bottom that year at $448 on August 20.
The home improvement boom is the byproduct of the housing boom in 2020. The housing boom left many older homeowners with hefty amounts of equity. Between September 2019 and September 2020, homeowners accumulated a collective $1 trillion in additional home equity. Deciding between improving or moving, many older homeowners decided to stay put, given the historic housing shortage the country is now facing.
DIY House Improvement Craze Benefits Home Centers
In 2021, 60% of survey respondents of a survey by Harvard University’s Joint Center for Housing Studies found that by late March had already started at least one DIY home project. By early May, that jumped to nearly 80%. Bank of America noted in February that Spending on home improvement overall increased by 7% in the latter half of 2020 and early 2021.
The DIY Improvement boom has greatly benefited the online tool sector. The global market for hand tools and accessories estimated at US$17.5 Billion in the year 2020, is projected to reach a revised size of US$23 Billion by 2027, growing at a CAGR of 3.9% over the analysis period 2020-2027
This has especially benefited home improvement centers like Lowes and Home Depot. Home Depot US store sales rose 7.4% in Q4 2021 and same-store sales grew 10.7% in FY 2021. Home DFeppot attributes this to the limited supply of available homes on the market, more people are investing in renovations and remodeling of existing homes.
Lowes total sales for the fourth quarter were $21.3 billion compared to $20.3 billion in the fourth quarter of 2020, and comparable sales increased 5.0%. Comparable sales for the U.S. home improvement business increased 5.1% for the fourth quarter. Pro customer sales increased 23%.
The annual growth rate of spending on home renovations and repairs will reach 8.6% by the middle of next year — topping recent gains of 5%, according to the Leading Indicator of Remodeling Activity.
With restrictions being lessened and travel bouncing back, consumers are re-evaluating their spending this spring. But even with fewer restrictions, many home improvements customers are left waiting for months to complete projects due to the continuing sky-high demand for contractors, with no end in sight.