Small, unplanned projects lift home remodeling

Americans invested in their homes during COVID-19 lockdowns, tackling to-do lists and upgrading their living areas indoors and especially outdoors.

Remember pictures of long lines of shoppers standing 6 feet apart outside of Lowe's and Home Depot in April?

Both retailers saw strong upticks in sales from do-it-yourself customers and so-called pickup-truck professionals. Shoppers spent an additional $2 billion at each company during the first quarter of 2020 compared to the prior year.

Demand strengthened and continued into May, Lowe's CEO Marvin Ellison said during an earnings call about first-quarter sales, which climbed to $19.68 billion.

Ellison pointed to activities ranging from outdoor landscaping to essential indoor repair and maintenance work to long-deferred home projects. He also gave a shoutout to "true standouts" among Lowe's suppliers, including Charlotte, N.C.-based Charlotte Pipe and Foundry Co.

Founded in 1901, Charlotte Pipe says it is the only company that makes cast iron and plastic pipe and fittings. The plastic products include behind-the-wall PVC and ABS drain, waste and vent pipe, and thin-walled PVC pipe for residential gutter runoff.

With estimated sales of $445 million, Charlotte Pipe ranks ninth among North American pipe, profile and tubing manufacturers, according to Plastics News' ranking.

For outdoor projects, the increased activity has been more than seasonal. Wary homeowners haven't wanted contractors inside their residences. Remodelers cited this as their top concern in April, May and June, according to Farnsworth Group & Home Improvement Research Institute's COVID impact tracker.

For this reason, remodelers who do exterior home improvements, such as gutters, siding, windows, doors, decks, patios and solar, are faring better than the interior trades — plumbers, electricians, HVAC, carpenters, painters, flooring and tile installers — as well as the design-build contractors and full-service firms.

"Homeowners can get a lot of work done like roofing, siding and doors and not feel quite as concerned about having contractors at their home," said Abbe Will, associate project director of remodeling futures for the Harvard Joint Center for Housing Studies.

Will spoke during a June 25 webinar organized by the National Association of Home Builders about the remodeling outlook in the wake of a pandemic and economic downturn.

The homeowner remodeling market is forecast to drop 0.4 percent to $326 billion by the middle of 2021, marking an abrupt about-face after annual gains of 5-7 percent in recent years, according to the Harvard Joint Center.

"The share of remodelers that expect to do less revenue in the coming months because of the pandemic is up to almost three [out of] four remodelers in the northeast and Midwest along with those focused on the interior specialty trades in all regions," Will said.

She pointed to the second-biggest concern for remodelers cited by Farnsworth Group: 55 percent say homeowners are worried about their money and finances. Unemployment remains high, states seeing spikes in COVID cases are renewing business restrictions, and more households could turn remodeling jobs into DIY projects.

Even before the pandemic hit, nearly all of the 47 metropolitan areas tracked by the Harvard center were expected to see slowdowns in improvement spending through 2020. Revised, COVID-adjusted projections now show annual homeowner remodeling spending will likely contract in 24 metros — up from nine in the original forecast — while 15 could see only gains of 1-3 percent compared to 2019 activity.

"Think about which markets are likely to be harder hit in this downturn, and we think the coastal markets are one and then markets that rely more heavily on tourism, services and restaurants, where unemployment has been higher. Those will be more challenged," Will said.

The outlook for the outdoor remodeling segment, however, is brighter for manufacturers like window and door profile extruder Deceuninck North America LLC. Company officials are encouraged by the trends and the uptick in demand, Greg Koch, vice president of sales and marketing, told Plastics News.

"As people are spending more time in their homes, there has been a renewed focus on home improvements and essential products that ensure healthier, more energy-efficient homes," Koch said.

New style and color options improve curb appeal, too, he added.

With estimated $160 million in annual sales, Monroe, Ohio-based Deceuninck North America is the No. 32 pipe, profile and tubing manufacturer in North America.

Window sales also were up for Cary, N.C.-based Cornerstone Building Brands Inc., which posted a 6.4 percent increase to $484 million for the business unit in the first quarter of 2020 compared to the previous year.

Siding sales were up, too, by 10.4 percent in the first quarter for Cornerstone. However, after factoring in acquisition costs for Environmental Stoneworks and Kleary Masonry Inc., the company says siding segment sales increased 3 percent.

With $2.36 billion in annual sales, Cornerstone ranks second among North American pipe, profile and tubing extruders.

The stimulus checks given to Americans as part of a historic $2 trillion relief package Congress passed in March certainly buoyed some consumer spending on home improvements.

So have canceled spring breaks and summer getaways.

"We're seeing certain pockets of home improvement capture dollars we think from people not vacation spending, buying a motorcycle or going on a cruise, but instead staying at home, which does cause us to wonder if we will see some soft spots over the next 18 months," said Todd Tomalak, a principal researcher with John Burns Real Estate Consulting LLC, an independent housing research firm focused on U.S. new construction and remodeling.

Eleven of the 15 building product categories followed by the Irvine, Calif., firm are rated above historical normal conditions of five on a 1-10 scale.

Decking had the group's best rating of 8.7, followed by bathroom, 8.6; plumbing fixtures, 7.8; paint, 7.0; HVAC, 6.9; cabinets, 6.8; kitchen, 6.7; roofing, 6.2; yard improvements, 5.9; windows and doors, 5.5; siding, 4.9; insulation, 4.5; flooring, 2.7; and lumber, 2.3.

"In order to be an 8.7, you'd have to have near highs in terms of industry spending in the category plus be approaching double-digit growth from a sales standpoint," Tomalak said.

That is the case for Trex Co. Inc., which saw robust demand for composite decking continue even after a pandemic was declared on March 11. First-quarter sales increased 12 percent to $200 million compared to the prior year.

With $694 million in annual sales, Trex is the sixth-largest pipe, profile and tubing manufacturer in North America.

The U.S. decking market, excluding substructures, was valued at $3.3 billion in 2019 and is projected to grow annually by 4.2 percent in volume and 5 percent in value through 2022, according to Principia Consulting LLC, a Malvern, Pa.-based research and consulting firm.

Ninety-four percent of decking products are sold for remodeling projects as opposed to new construction, the firm says. That bodes well for the wood alternatives, such as capped composite, cellular PVC and uncapped composite decking.

"I think people are going to appreciate their outdoor living spaces more now than ever," Nancy Musselwhite, an industry analyst at Principia, told Plastics News. "It's safer to be outdoors and people want to have a nice, aesthetically pleasing space available to an extended family or small group of friends. It's really a positive feature right now."

The decking outlook is bolstered by a flurry of product launches. Manufacturers introduced more entry-level price points for wood-alternative products, creating a slight shift toward that category and away from wood in terms of lineal feet, Musselwhite said.

In 2019, by volume, wood decking had a 78 percent share of the market, wood alternatives a 20 percent share, and other decking a 2 percent. That's a 2 percent gain for wood alternatives and a 2 percent loss for pressure-treated, cedar, redwood and hardwood, Musselwhite said.

"It's a very slow erosion of wood, but it did accelerate between 2018 and '19 primarily because of the influx of price-point boards into the marketplace by major suppliers," she added.

Other kinds of decking, such as hollow vinyl, other plastics and aluminum, held steady at 2 percent.

Capped composite decking represented nearly one-third of the value of the total decking market in 2019 and will grow faster to 2022 than any other decking product, Principia says.

By comparison, cellular PVC, which has less than 10 percent of the 2019 value of the decking market, is forecast to be the second-fastest growing product to 2022.

"Cellular PVC is expensive, but homeowners like it because it is a good-looking board and contractors like it because it is lighter weight and you can carry a 16- or 20-foot board alone. That's hard to do that with composite," Musselwhite said. "Cellular PVC also is much easier to bend and curve and that's an aesthetic that has taken decking by storm."

Early in the year, John Burns Real Estate Consulting forecast 7 percent growth for remodeling spending in 2020.

Then, COVID-19 spread across the U.S. and 12 percent of projects were canceled and 22 percent were deferred, Tomalak said.

"At the same time there's this wave of unplanned, smaller-ticket incremental projects that may be somewhat temporary, offsetting the decline in planned projects," Tomalak said.

A survey of 5,000 households told the firm one in three homeowners has undertaken an unplanned remodel project under $1,500 and one in six did an unplanned project costing more than $1,500.

"That's still a small remodel, but the scale is huge," Tomalak said. "One out of six homeowners is a huge incidence rate.

The canceled projects also should materialize over the 18 months, he added.

"The story here is we have two different remodeling markets, where big projects are declining this year and next, and smaller projects, which are a lot of those unplanned projects, are growing 11 percent cumulatively between this year and next."

Overall, however, the firm expects remodeling growth of 2 percent for this year and 0 percent next year.