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RETAILOBSERVER.COM OCTOBER 2022 32 A S S O C I A T I O N N E W S R ising interest rates, rampant inflation, superheated demand for housing, tight inventories of homes for sale and the relatively new Build-To-Rent (BTR) market are all among the factors creating volatile economic conditions – and they're all closely tied to the health of kitchen and bath construction and remodeling. "This is an industry that has consistently adapted to rapidly changing circumstances over the course of the past two and a half years. There is understandable concern around inflation and interest rates and the potential impact on the industry, but the industry outlook on future business conditions indicates there is still cautious confidence in the ability to navigate a path forward," shared Bill Darcy, NKBA CEO. The National Kitchen & Bath Association (NKBA), in partnership with Zonda, explored the future of home ownership, and how these factors affect K&B during a three-hour virtual event in early August called The Futurist Summit sponsored by Signature Kitchen Suite. Hosted by Bill Darcy, NKBA's CEO, Zonda economists and market analysts put the housing and real estate markets into perspective. Speakers included Timothy Sullivan, senior managing principal; Ali Wolf, chief economist; and Todd Tomalak, principal, advisory of building products. KEY TOPICS EXPLORED INCLUDED: • The State of the Housing Market and Wider Economy Ali Wolf, expert analyst and chief economist for Zonda, shared insights about the state of the real estate/housing market and the impact it will have on home ownership as well as future industry trends. The overall economic picture can be focused on three components: employment, wage growth and supply/demand. "People want to buy, but there's a shortage of goods available for purchase, which leads to inflation – arguably the biggest economic story right now," Wolf said. The market is still very strong and the industry has acknowledged that inventories have started to rise again, and prices have flattened. It's important to strategize, focus on fundamentals, do consumer research, and figure out where consumers are willing to compromise. "Good product, good operators and good locations always win," Wolf continued. • Home Improvement: Building Product Risks and Opportunities Todd Tomalak, principal, advisory of building products at Zonda took a deep dive into what factors are uniquely impacting each building product category. Inflation and real income are of more concern. Right now, inflation is outpacing wage growth. "For growth overall," Tomalak projected, "we'll see slowdowns at the entry-level and the most expensive ends, with the overall growth of 12 percent in 2022 and 6 percent in 2023." Despite home sales slowing and inflation that's outpacing wage growth, projections for the remodeling industry are still pretty strong. Tomalak shared that we can often predict what will happen in the short-to-medium term based on past performance. • The Generational Divide Molly Carmichael, Zonda's principal, shared today's demographics and consumer shifts, including what consumers want and are willing to pay for in their next home. Carmichael also provided insights on today's modern kitchen, indoor and outdoor entertainment, and the most important things that consumers of all generations are looking for today. • Into the Future: The Rise of Rental Housing and Other Shifts Timothy Sullivan, senior managing principal at Zonda, shed some light on the continued growth of the multi-family and build- to-rent product and how the shifting market may evolve, and what this will look like over the next several years. • Impacts on the K&B Market The NKBA Futurist Summit shed light on the evolving housing market, home ownership in transition, and how it impacts the kitchen and bath industry. Bill Darcy, NKBA CEO, and Randy Warner, VP of sales at LG Builder and Signature Kitchen Suite and Vice Chair of the NKBA Board of Directors, summarized the virtual conference with "Home Ownership: The Evolution of the American Dream," noting that K&B demand is still strong despite dramatic fluctuations, simply because there is still a housing crunch. Looking ahead, there's still a lot of innovation on the horizon that will help drive demand, whether it's for new construction or the remodel/replacement market. "Product is always king, and if you're innovating and delivering new products…it will only help drive demand, Warner said. "No matter what the economy is, there will always be a need for a replacement product, or a need to update. Those who are innovating will win that business." The NKBA Futurist Summit is available to watch on-demand at nkba.org/info/research/futurist-summit. REALITY SETS IN FOR THE KITCHEN & BATH INDUSTRY

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