Though it seems like yesterday, it’s been 10 years since the housing market plummeted. Over the course of the past decade, new construction starts went from a half million a year to over 1.3MM today. This has not only put builders back into the game, but it’s also driven up the cost of new homes. Not only are builders busier, but construction materials costs continue to increase over one percent a quarter: 5.6 percent from 2017 to 2018. Because of the increase in building costs, current national home sale closings have surpassed inventory in the sought-after $150K-$500K price range. The result is a seller’s market and an increase in available home inventory.
It has also resulted in a hockey-stick graph for remodeling with forecasted projections to continue through 2020. With all that said, this is where trends and forecasting play a critical role. The question is, is ‘fat and happy’ sustainable for the industry? According to a Metrostudy Housing study, key economic metrics are positive. Job growth is healthy and unemployment rates are at a 13-year low. IHS Markit and Macroeconomic Advisers state that crude oil prices will be restrained by rising US supply, wage gains will continue to outpace inflation and spending will continue to be up due to federal tax cuts; however, multiple sources at the HIRI conference stated that because of all of these reasons, the Federal Reserve is expected to raise the federal funds rate, negatively impacting mortgage rates. With an anticipated increase of more than one point, rates will rise to a range that we haven’t seen since before the housing crisis. So do increased mortgage rates plus limited housing inventory, plus higher costs equal a potential stall in the marketplace? Or, it could result in an even bigger bump in the home improvement category!
Who’s Driving the Category?
Availability to content has helped create more Do It Yourself-ers (DIY-ers), that are willing to tackle most projects in the home. According to Nielsen, landscaping, Interior wallpaper or paint, plumbing and flooring top the list for home improvement projects. Whether its cable networks like HGTV and DIY Network or online destinations like Houzz and Pinterest, there’s no shortage of ideas on how to make your home more attractive and to continue driving the category product sales.
Marketing in a Tumultuous Landscape
With marketing being driven and informed by a plethora of data, it’s easy to fall into a non-human approach to what we do. Gartner predicts that by 2020, people will have more conversations with bots than their spouse. Whether you believe that or not, it’s hard to ignore that phone interactions with most companies are primarily with a computer. Instead of trying to fight it, as marketers, we embrace it. We use data to better inform where and how to speak to a consumer. At the HIRI conference, Venveo spoke on three big shifts for brands and companies to grow awareness:
- Conversation is the new lead
- Value is the new currency
- Community is king
A common theme in these shifts is that irrelevant one-way messaging is a thing of the past. Data-driven marketing equals quality consumers resulting in a better chance of short-term sales and long-term customer relationships.
Impact of E-Commerce on the Home Category
It’s no secret that e-commerce is changing how we live. Reviews, comparison pricing, one-click purchasing and home delivery are just a few ways how it’s simplified our lives. According to the NPD Group, Inc., the home improvement category saw a 4.6 percent increase in sales overall and a 33 percent increase in online sales. Smaller items and frequency-based products such as blinds, air filters and area rugs were the leaders in growth. Options like ‘Subscribe and Save’ with Amazon will continue to propel this category, especially among products like filters and scheduled maintenance products. Even in historical Do it For Me (DIFM) (Do It For Me) categories like flooring, consumers are beginning to purchase more modular, self-install products online, enjoying the benefit of install savings, flexibility with design and the advantage of ship-to-home. Omni-channel shopping is also a contributor to retailers needing to evolve their online shopping capabilities:
- 1-in-5 buyers shop in-store and online
- 8 –average number of purchases made in-store and online in the last six months
- 6x – Omni-channel buyers spend more than in-store only
It’s clear retailers like Home Depot have embraced this with their free ship-to-store option. But, in order to compete with Amazon, primary brick-and-mortar retailers will need to continue to evolve the value they bring their consumer and balance that with price and quality of the products they sell.
So, to recap HIRI’s presentation:
- The home-improvement market is riding a wave right now
- Increased mortgage rates and tight inventory could create problems in the near future
- Leverage data to identify, quality and communicate with the right customer
- Brands and retailers need to continue driving the value they bring their customers
- Evolution is critical to be relevant