Hometown Impact: How Local Housing Markets are Impacting the Home Improvement Industry

While con­sumers con­tin­ue to weath­er infla­tion­ary prices and ris­ing inter­est rates, many have devel­oped a neg­a­tive out­look on the US econ­o­my. Accord­ing to Numerator’s 2023 Eco­nom­ic Out­look Study, 63% of US con­sumers say they feel at least some­what neg­a­tive­ly about the cur­rent econ­o­my and 68% feel as though we are cur­rent­ly in a recession. 

As con­sumer finan­cial con­cerns rise, dis­cre­tionary spend­ing— par­tic­u­lar­ly on non-essen­tial durable goods— tends to decline. So how are eco­nom­ic con­di­tions and pre­vail­ing neg­a­tive sen­ti­ment impact­ing the Home Improve­ment indus­try? In Numerator’s lat­est Home Improve­ment report, we exam­ined how cur­rent mar­ket dynam­ics are impact­ing home improve­ment across dif­fer­ent con­sumer groups, and what shifts are occur­ring in the home improve­ment retail land­scape as a result. 

Consumers Across the Financial Spectrum are Pulling Back

While near­ly all con­sumers are fac­ing some lev­el of finan­cial pres­sure from cur­rent eco­nom­ic con­di­tions, they haven’t all been impact­ed equal­ly. Our Eco­nom­ic Out­look Study iden­ti­fies five dis­tinct con­sumer seg­ments based on con­sumers’ cur­rent eco­nom­ic sen­ti­ments, finan­cial sit­u­a­tions, and demo­graph­ic mark­ers like work sta­tus, pur­chase pow­er and age. 

Exam­in­ing observed pur­chase behav­iors across these seg­ments shows that not all shop­pers are react­ing to the increased finan­cial bur­den in the same way. Spend­ing cuts in durable goods cat­e­gories are evi­dent across all groups, includ­ing two cru­cial Home Improve­ment sec­tors— Home & Gar­den and Tools (94 index vs. YA) & Home Improve­ment (91 Index). How­ev­er, we can see that cer­tain groups, like Future Fliers and Reserved Retirees, are not pulling back as much or at all. 

Home Improvement Retail Today

The state of the econ­o­my and chang­ing mar­ket dynam­ics have had a clear impact on con­sumer inten­tions sur­round­ing their home project plans. With­in the past year, 77% of home­own­ers have com­plet­ed a DIY project and 50% have com­plet­ed 3+ projects— up 5.3 pts from Octo­ber 2022. Many of these con­sumers look­ing to com­plete their DIY projects are mak­ing their pur­chas­es in-store ver­sus online, with lead­ing retail­ers see­ing mar­ket share gains from a year ago, includ­ing Lowe’s and Wal­mart in the Home & Gar­den and Tools & Home Improve­ment sec­tor. This varies at depart­ment lev­el, though, with spe­cial­ty retail­ers like Sher­win Williams and Har­bor Freight gain­ing mar­ket share in Paint and Wall Cov­er­ings and Tools, respectively.

New Consumers Entering Home Improvement

A demo­graph­ic break­down of home buy­ers and sell­ers from the Nation­al Asso­ci­a­tion of Real­tors Gen­er­a­tional Sur­vey shows a clear gen­er­a­tional dif­fer­ence between buy­ers and sell­ers, with Mil­len­ni­als account­ing for 43% of home pur­chas­es between 2021 and 2022. As younger gen­er­a­tions enter home­own­er­ship, their share of home improve­ment spend is increas­ing, with a 0.51% increase in Gen Z share of Home & Gar­den and Tools & Home Improve­ment spend and 0.15% increase in Mil­len­ni­al share of Tool spend.

Addi­tion­al­ly, younger shop­per gen­er­a­tions have shift­ed out of major city cen­ters due to the pan­dem­ic and enter­ing new life stages. With these shifts, new groups of con­sumers and behav­iors have been added to tra­di­tion­al­ly less pop­u­lat­ed mar­kets, hav­ing a last­ing impact on the retail environment.

The Impact on Home Improvement Sectors in Local Markets

One-third of prospec­tive buy­ers in key mar­kets (Los Ange­les, Dal­las, Chica­go, and Mia­mi) have decid­ed to ren­o­vate ver­sus pur­chas­ing a new home for cost sav­ings. With­in these areas, home improve­ment share in spend is increas­ing in regions that are see­ing dips in home prices, such as Chica­go and Dal­las. Region­al­i­ty also has a large impact on what depart­ments are grow­ing in the Home Improvement/​Tools and Home & Gar­den sec­tors. Build­ing Sup­plies is grow­ing share in Los Ange­les and Dal­las, while Paint­ing Sup­plies is grow­ing in Mia­mi and Kitchen & Din­ing is grow­ing in Chica­go. Learn more in from Numer­a­tor’s past webi­nar on this topic.

Why It Matters

What does this mean for Home Improve­ment brands and retail­ers hop­ing to suc­cess­ful­ly nav­i­gate through the eco­nom­ic uncer­tain­ty? Infla­tion is impact­ing con­sumers’ plans for home projects across the board, and the cur­rent mar­ket con­di­tions are more chal­leng­ing than they’ve ever been before. How­ev­er, there are pock­ets of growth retail­ers and brands can tar­get gen­er­a­tional­ly and region­al­ly, with share oppor­tu­ni­ties spe­cif­ic to sec­tors, retail­ers, and departments.

Numer­a­tor can help you reach a deep­er under­stand­ing of cus­tom con­sumer seg­ments along with oth­er key home improve­ment shop­per groups so you can engage with them more effec­tively. This deep­er con­text allows you to con­fi­dent­ly act on the biggest share growth oppor­tu­ni­ties by under­stand­ing both who and where those oppor­tu­ni­ties are. Get in touch to find out more.

There’s More to Know.

To learn more about how local hous­ing mar­kets are impact­ing home improve­ment, down­load the full report from Numer­a­tor.

Join us at the HIRI 2023 Insights Sum­mit in Chica­go. Learn more and reg­is­ter for HIRI sum­mit here.