Here are five takeaways.

1. Recession concerns are causing shifts in consumer behavior, yet a strong desire for homeownership and/or upgrades will continue.

While economists haven’t officially declared a recession, many are saying the housing market is already there. The National Association of Realtors predicts 4.78 million existing-home sales in 2023 — the slowest pace in 10 years. Furthermore in 2022, single-family starts saw an annual decline for the first time since 2011.

Without question, current economic conditions are challenging the housing market. In response, homeowners are more likely to seek “looks for less” that don’t compromise value, turning to generic store brands and synthetic materials more often.

We analyzed the current state of the market and projections for the home and building industries as well as the outlook for home remodeling.

Here is some interesting data at the local and national levels:

• According to the National Association of Realtors, all of the top 10 markets to watch in 2023 are in the South.

• We took a close look at our home market. Compared to the national average across key housing metrics, Charlotte is outpacing home price appreciation and growth in home values since the last housing market peak.

• Charlotte has smaller declines in single-family permit growth, with a quarter of its homes sold to investors instead of homeowners.

• Zillow predicts Charlotte will be the hottest real estate market nationally in 2023 based on its forecasted annual home price growth.

• Harvard University’s Joint Center for Housing Studies projects a steep decline in annual gains of home renovation and maintenance spending, from 16.3% in 2022 to just 2.6% by the end of 2023.

2. The pandemic ushered in the next evolution of the home.

In the 1950s, homeownership symbolized the realization of the American dream. By the 1980s and 1990s, homes had become a little bigger, with plush yards and white picket fences as a mark of status.

The COVID-19 pandemic ushered in the next evolution, with Americans placing a high value on flow. Accordingly, the ideal home became a productive, efficient hub, designed to help manage and maintain hybrid lifestyles.

Today more than ever, a majority of homeowners are prioritizing home improvement in line with lifestyle considerations. They have clearer ideas of how they want to use and enjoy their homes and prioritize functional additions such as home offices, outdoor areas and natural light that best support their lifestyle.

Industry experts predict that:

• Homeowners will be willing to spend more on a kitchen remodel in 2023 than in previous years, with a focus on functionality, adequate space, layout, storage and flexibility.

• Countertops, backsplashes and sinks are among the most popular features to upgrade but are likely to be renovated by a smaller share of homeowners this year versus 2022.

• Maintenance will be a top priority along with bathroom remodels. However, larger renovation and remodeling projects, including upgrading the HVAC system, refinishing a basement or adding solar panels are on the horizon in the next five years.

3. Smart, healthy and flexible home trends are on the rise.

Lifestyle and functionality are a driving force in home improvement, including:

• How people think about the home

• How they prioritize improvements

• Where they want to invest their available funds

A desire for connection and community, paired with the continued need for privacy, function and sanctuary in the home, will lead to evolved ways of thinking about living spaces. Investments in smart, healthy and flexible homes are expected to prevail and extend into kitchen and bath designs.

• Smart home technology: In the kitchen and bath, smart faucets are the most popular investment, offering significant value via water efficiency, touch or touch-free activation and a fingerprint-resistant finish. The bottom line? Homeowners get a lot of value from a pretty minimal investment.

• Wellness: Healthy homes continue to take priority in both kitchen and bath design, with 73% of homeowners and renters considering health when selecting their next home, especially whole-home air and water filtration systems.

• Flexibility and connection: The future will include integrated environments that create the possibility for transformation. Shifts toward connection and community can be big or small, from co-living spaces to greater utilization of the front porch.

4. Millennials and Gen Z represent key opportunities as they come into their prime homebuying years.

Millennials and Gen Z share some behaviors and will respond better to specific communication strategies.

Millennials — born between 1981 and 1996 — are in their prime homebuying years, though 92% of millennials say inflation has impacted their goal. Among those who still intend to buy, there is currently not enough housing stock to meet demand. This imbalance has driven housing costs to record highs: John Burns Real Estate Consulting calculates Charlotte as the most overpriced market in the U.S. at 66%, despite the fact that Charlotte is considered relatively affordable at a national level.

Despite these challenges, millennials are driving the homebuying and home improvement market, accounting for both the highest spending and highest number of projects as compared to other generations.

Gen Z (born 1997–2012) is on the cusp of their prime homebuying years. As early adopters, their behaviors drive trends that are expected to reach other generations within the next five to 10 years.

If you want to make a connection with the youngest cohort of homebuyers, consider these tips:

1. Educate and empower them. They will be entering the home improvement stage of life later than their older siblings and do not want to appear ill-informed in the face of major financial decisions. Become a trusted, accessible resource by validating their questions (and experience) — “It is OK to not know everything” — and educating them on the types of questions to ask. Creating a great online experience will also help empower them by providing the information they want and the tools they need to make informed decisions about homeownership.

2. Provide clear examples and visual references. They are visual learners and buyers. Understand the importance of mobile and video in their journey to learn and understand. In a work setting, give clear examples of what you’re looking for that they can observe.
   

3. Keep the dialogue going. They are looking for ongoing, quick-hitting feedback. Engage in open and honest communication to earn their trust.

5. Social media continues to be a source for unique renovation ideas.

From small appliance garages to DIY countertops and peel-and-stick backsplashes, social media is changing the game for home improvement. Platforms such as Instagram, TikTok and Pinterest give consumers a glimpse into friends’ and influencers’ homes. These platforms have heavily informed home improvement choices and remain an important source for unique renovation ideas. Social media platforms, however, can give anyone the ability to disrupt the design cycle, and experts predict this will lead consumers to make purchasing decisions based on personal expression more so than trends.

Of these trends, some of the most popular include:

• Costco doors: Small doors built between a garage and pantry for grocery unloading into the home.

• Small appliance garages: Moveable backsplashes or special cabinet configurations to hide small appliances and keep kitchen counters clean.

• DIY countertops and backsplashes: Peel-and-stick, spray-on marble effect and other techniques make it easy for homeowners to transform their kitchen with minimal investment.

Have questions about how consumers may tackle home improvement projects in 2023? Want to know how Wray Ward can help your business navigate the industry landscape this year and beyond? Email me.