Residential bath & kitchen market outlook

According to the National Kitchen and Bath Association (NKBA) Market Outlook, residential bath and kitchen spending is expected to decline 2% to approximately $175 billion this year – indicating that the sector remains healthy, overall, based on historical standards, despite challenges outlined below.

After a turbulent few years, home sales in 2025 are expected to slow so long as inflation and high interest rates are at play. New home prices are also expected to rise — the amount depends on what source you look at. The NKBA predicts home prices to rise at an average 3% while Goldman Sachs says 4.4%. Regardless, it seems 2025 will remain a tough year for many potential homebuyers. What does this mean for the bath and kitchen market? Experts say the remodeling market will continue to prove fruitful, making up for the somewhat tight new construction market.

Katie Hayes, director of brass product management for Gerber Plumbing Fixtures says homeowners are investing in timeless design and adaptable solutions.

“Instead of following fleeting trends, homeowners are increasingly embracing a timeless and adaptable design style to ensure their home's aesthetic lasts. Growing consumer awareness surrounding sustainability is influencing these enduring design choices and aiding homeowners in long-term cost savings,” she says.

“In bath, consumers are looking to create restorative, spa-like spaces. Post-pandemic living continues to keep health, wellness and self-care top of mind,” Hayes continues. “In kitchen, the integration of “smart kitchen” technology is becoming more mainstream and accessible for consumers, increasing efficiency and connectivity in the hub of the home.”

Dip in new construction

The NKBA expects new construction to decline 2% to $108 billion in 2024 due to a number of factors, including a 6% decline in new housing starts. There is a shift toward more economic, starter-home new construction starts with smaller kitchen and primary baths. Although new construction spend will slow, continued material and labor inflation will likely make up for the lost cash flow throughout the sector.

It is still predicted that the Fed will lower interest rates in late 2024 and into 2025 — no matter what happens with the election.

Although high interest rates are making it difficult for some to purchase new homes, this doesn’t mean demand for new home is on the decline. In fact, since many homeowners are staying put with their favorable rates from 2018-2021, there is a shortage of available homes, meaning new construction home demand is certainly present.

According to the NKBA, new construction bath and kitchen spending will decline slightly (-2 %) to $108 billion by the end of 2024. This decline is driven by several factors: a slow in starts (-6%), a shift towards multifamily completions for most of 2024 and a trend towards smaller kitchens and baths.

The good news for bath and kitchen pros is that this drop in new construction is being partially offset by an increase in modest, single family home builds, labor and material inflation, larger kitchens in move-up homes and a strong remodel market.

Smaller R&R jobs take the lead

Because of the impact of inflation on average household savings, and the high rates making it more difficult to tap into home equity, the repair and remodel (R&R) market is forecasted to decline 2% to $67 billion.

The NKBA reports that high-income homeowners that drove the fruitful remodel market over the past few years are being cautious, meaning that larger R&R jobs are being broken down into smaller projects. So with this cautious spending behavior, why is the remodel market still providing good news for bath and kitchen pros?

Well, many homeowners had to settle for homes they wouldn’t otherwise select due to high home process and unfavorable rates. These homeowners will soon be looking to make updates to these homes, bring them up-to-date with today’s bath and kitchen trends.

Additionally, more than 1.7 million homes will enter their prime remodel years over the next four years, surging demand for bath and kitchen projects. Homeowners who are married to their low-rates are still choosing to repair and remodel instead of seek new homes.

Some sources say there is a balance happening between demand for R&R and The Leading Indicator Remodeling Activity (LIRA) projects that declines in annual spending for renovations and maintenance will ease to just -0.5% through the second quarter of 2025.

“Economic uncertainty and continued weakness in home sales and the sale of building materials are keeping a lid on residential remodeling, although many drivers of spending are starting to firm up again,” says Carlos Martín, Director of the Remodeling Futures Program at the Center. “After several years of frenzied activity during the pandemic, owners are now making upgrades and repairs to their homes at a steadier and more sustainable pace.”

“Annual spending on homeowner improvements and maintenance is expected to reach $466 billion through the second quarter of next year, on par with spending over the past four quarters,” says Abbe Will, Associate Director of the Remodeling Futures Program. “The home remodeling slowdown should continue to be relatively mild, with activity stabilizing just shy of last year’s peaks.”