On October 26, the Manhattan Chapter of the National Kitchen & Bath Association (NKBA) held its second annual Education Day. The event took place in the beautiful Architects & Designers (A&D) building on the corner of 8th Ave and 58th St. The A&D building is home to 40 stunning luxury kitchen and bath showrooms, making it the perfect venue to host the NKBA Education Day and commemorate the 60th anniversary of the world’s leading kitchen and bath trade association.
The event began in the Fisher & Paykel Experience Center. The spacious showroom doubled as a display for the brand’s premium kitchen appliances handcrafted in New Zealand and an opportunity for munching and mingling with designers, retailers, remodelers, manufacturers, distributors, fabricators, installers and other industry professionals from across the kitchen and bath space. The Fisher & Paykel Experience Center also acted as the stage for the Education Day’s keynote, delivered by the CEO of the NKBA and the Kitchen & Bath Industry Show (KBIS), Bill Darcy.
The Current Kitchen and Bath Market
The keynote was an overview of the market outlook for the kitchen and bath market in North America from 2023 to 2024. The NKBA conducts a research study twice a year to determine the size of the market. According to research by the NKBA, as of July 2023, the residential kitchen and bath market is forecasted to reach $179 billion. This is a staggering amount of growth when compared with market numbers in 2019, which were valued at $48 billion.
“We had a hard time [because of a change in] life dynamics that have hit us over the last several years and [learning to] understand and adjust to that,” Darcy explained. “We are [doing] a fair amount better than we would have been with a reasonable growth rate since 2019, so [that is] certainly something to celebrate.”
New Construction is Trending
Darcy continued his keynote presentation by breaking down the market into two key indicators: new construction versus remodeling. Research by the NKBA shows that in 2023, new construction will be valued at $111 billion and remodeling will reach $68 billion, representing 62 percent and 38 percent of the market, respectively.
Consumer demand for new construction was spurred by a resurgence in new home sales during the spring and summer of 2023. Factors such as a consumer’s desire to move without waiting for rates to moderate, a lack of existing home inventory, and an increased amount of offers from builders for perks like mortgage buy-downs, closing cost contributions and product upgrades to boost sales have influenced new construction projects. As a result, new construction accounts for 31 percent of the kitchen and bath market, compared with 10 to 15 percent historically.
To explain this stark difference in historical trends, Darcy cited research from the National Association of Home Builders (NAHB). Reasons for a resurgence in new construction over remodels can be attributed to the weakening of new home sales in August, which has elevated mortgage rates and challenged affordability conditions. Inflation and interest rates of 8 percent have also made their way to the kitchen and bath industry, thus affecting the amount of new construction versus remodels. High inflation, high interest rates, and higher prices on kitchen and bath products have depleted consumer savings and incentives for remodels. “No one loves when their debt is mounting, and we know that consumers’ debt has been mounting,” Darcy iterated.
The U.S. Economy is Awash with Uncertainty
Darcy pivoted to a discussion on the overall state of the United States economy. Addressing a topic that has been weighing on the minds of consumers and retailers alike, Darcy read a prediction from the Conference Board that “forecasts that U.S. economic growth will buckle under mounting headwinds early in 2024, leading to a very short and shallow recession.” Talks of a recession have been mounting in intensity as 2023 has gone on without indications that one is occurring. Furthermore, there is still uncertainty on whether a recession or a much-preferred soft landing will occur in the coming months. Darcy continued that recession “is a scary word, [and for] probably 18 months we’ve been about to be in a recession, but we’re not.”
Hope is on the Horizon for the Kitchen and Bath Market
After addressing the elephant in the room, Darcy returned to the kitchen and bath market. He revealed that the Q3 2023 Kitchen & Bath Market Index (KBMI), a market health indicator, is 53, two points below Q2. Though this drop marks nearly two years of deceleration for the market, Darcy expressed some optimism for the kitchen and bath industry. “Anything above 50 [means] the market is still growing,” Darcy explained. He broke down the Q3 2023 KBMI further. He explained that current conditions are rated at 47, which is down from 49 in Q2 and the same as Q1 2020.
All is not doom and gloom, however. The future conditions rating is expected to be 57. Though is this down from 65 in Q2 and is the third consecutive decline of 2023, Darcy noted that this number “is the big light at the end of the tunnel, the optimism that we see, that you all see, for the future.”
The kitchen and bath industry as a whole is also experiencing some welcomed gains. Darcy explained that professionals in the industry rate the overall health of the segment as strong. He attributes this to the diversity of the kitchen and bath industry. “We are a very diverse spectrum of the industry: manufacturers, designers, retail, builders.” Optimism among members of the NKBA remains strong as well, as 44 percent of all members and 49 percent of all manufacturers expect higher revenues in 2024.
2024 Projected to be A Successful Year for the NKBA
Darcy began the end of his keynote with a look toward 2024. Though remodels are down as of now, he anticipates that remodeling will make a comeback. Citing Todd Tomalek, Principal of Building Products at Zonda, Darcy predicted that the period of 2020 to 2030 will be the Golden Age of Remodeling. He then listed five key drivers of short- and long-term remodeling demand: consumers with mortgage rates below 5 percent, record-level numbers in home equity, home price appreciation, an upcoming increase in the number of homes in their prime remodeling years and homeowners moving more frequently.
One demographic expected to drive the kitchen and bath market in 2024 is women between 30 and 40. “This demographic is growing,” explained Darcy. A reason for this is what Darcy referred to in his presentation as the “mini Baby Boom” among college-educated women aged 35-44, which is expected to increase the amount of kitchen and bath spending. Darcy’s presentation also stated that this demographic is pre-disposed to upgrade to luxury kitchen and bath products and is more likely to utilize professional designers for kitchen and bath projects.
A Look Into the Latter Half of the Decade
In the second half of the decade, Darcy expects the kitchen and bath industry to continue to experience healthy growth and an increase in remodeling. He also expects that luxury will make a comeback as the decade goes on. “Although we do see recovery fluctuating, luxury is going to drive the future.”
Growing confidence in the North American market, especially from European-based global brands, is also primed to impact the kitchen and bath market for the rest of the decade. European influence is also anticipated to manifest in kitchen and bath trends, specifically in the way of contemporary and modern European styles in brands and design choices.
Darcy ended his keynote with a quote from Federal Reserve Chair Jerome Powell to communicate to the kitchen and bath professionals at Education Day the current state of the economy and quell worries about a recession. The quote read, “I’ve always thought that the soft landing was a plausible outcome…ultimately, this may be decided by factors that are outside our control at the end of the day, but I do think it’s possible.” Though Powell’s statement is not a straightforward indicator of what is to come for the U.S. economy, Darcy’s keynote presentation was a comprehensive overlook of the success that is to come for the kitchen and bath industry.