The pandemic took the homebody economy mainstream – and it’s here to stay

homebody economy
Elevated home spending will coexist with spending on experiences in a post-pandemic world.

Americans are going on a spending spree.

In a post-stimulus, increasingly vaccinated world, they’re ready to live like it’s 2019 again. They’re buying dresses, jeans, and crop tops and booking beauty services like mani-pedis and haircuts for their hot vaxx summer. They’re taking public transit, dining at bars and restaurants, and taking flight.

It’s good news for the economy, which needs Americans to spend a good portion of the $2.6 trillion they’ve saved during the pandemic to help fuel what could be the biggest boomtime in a generation.

But something is different – the spending on private or homebound matters, which spiked during lockdown, is staying high. Americans’ yearlong stint inside boosted the homebody economy, a phrase coined in 2018 by Vox’s Kaitlyn Tiffany coined to describe the growing market among millennials, who couldn’t afford to do much but stay at home. Now, many Americans seem to be enjoying this way of life, and it doesn’t look like it’s going away anytime soon.

Home spending grew at a strong pace in April, according to a Bank of America Research note from May 14. It found that for the week ending May 8th, the average daily spending in home categories grew by 37.8% over a two-year basis. A recent survey by McKinsey & Co. found that consumers intend to continue the investments they made in their home life post-pandemic.

What McKinsey predicts is a “rebalancing” of the homebody economy. What emerged in 2020 is a new category of spending in the form of private consumption, that might be here to stay even as we return to normal. Home improvement, at-home cooking, comforts like bedding and pajamas, and online entertainment may all now get as much attention as experiences like travel and dining out traditionally have.

The home improvement boom

Many Americans turned to home renovation projects during quarantine, the beginning of a long-lasting boom.

Home improvement and repair spending grew by nearly 3% to $420 billion in 2020, per a recent study by Harvard University’s Joint Center for Housing Studies (JCHS). Abbe Will, one of the report’s researchers, previously told Insider they expect the home remodeling market to expand even further in 2021 – by 4% – as homeowners complete discretionary projects or those they put off during quarantine.

Spending at home improvement retailers is currently outpacing spending at product retailers, per the BofA data. And UBS’ Evidence Lab DIY survey found that a record percentage of homeowners are planning projects. In March, 71% showed intention to do a project within the next three months.

contractor home remodel design
Higher spending on home improvement is set to continue through the rest of the year and beyond.

Baby boomers with equity led the home improvement boom, driven by newfound time on their hands, the desire to stay in their homes, and a historic housing shortage. With moving to a different place in such a cutthroat market an unattractive option and the value of homes going up amid record-high housing, they became more willing to spend on remodeling than past generations.

But millennials were cashing in on home projects, too. DIY renovation became a new form of discretionary spending during the pandemic for wealthy millennials, who no longer had travel and brunch to spend on. But it also became a way for the less wealthy subset of the generation to get their hands on a house amid a shrinking housing inventory.

Some, unable to outbid all-cash offers, resorted to buying fixer uppers. Many checked off their smaller, more budget-friendly renovations last year and are now facing more expensive renovations like bathroom and kitchen remodels that will continue to fuel the boom through 2021 and beyond.

Newfound at-home hobbies and luxuries

While home improvement spending has been one of the biggest sectors driving the sustaining homebody economy, the BofA note also found that spending in furnishings and bedding is playing a role. They’re both an offshoot of home renovations, but bedding also symbolizes an upgrade in comfort – with coziness a common theme in pandemic spending.

A spokesperson for Liketoknow.it told Insider’s Bartie Scott in April that consumers “are very much still in the cozy mindset,” continuing shopping for the things that began trending since the start of lockdown: loungewear, matching sets, nap dresses, and home bedding.

Self-care items like pajamas took the place of what Lorna Hall of London-based trend forecasting firm WGSN calls “scheduled spend” – the purchases people regularly made in their pre-pandemic routine, like coffee, commuter fare, and lunches out. These regularly scheduled budgets changed as routines did, but they might have found a permanent place as we change routines yet again. As Hall told Scott, “bedtime is a thing that comes around every day.”

millennial cooking
At-home cooking might be here to stay, even as people venture out to restaurants more.

As part of this routine shift, people also took on new at-home hobbies and domestic activities. The pandemic changed Americans’ cooking prowess, as many turned to the kitchen with nothing better to do. They made more meals at home, experimented with different palates, and focused more on healthy ingredients – all of which could have long-lasting effects on how people cook and shop for years, CNBC’s Melissa Repko reported.

It sparked a resurgence in meal kit delivery services, which McKinsey doesn’t see abating. Between 60% to 70% of respondents said they expect to continue digital food related activities after the pandemic, such as meal-kit delivery services and new store and restaurant apps. Respondents also expect to accelerate their digital spending in pet products and consumer electronics going forward, two categories that are also seeing two-year growth, per BofA data.

Spending on consumer electronics will only enhance the at-home entertainment experience. McKinsey also forecasts that the online entertainment and wellness habits adopted during the pandemic – think the TV watching and streaming surge and the turn to digital fitness apps and social channels – will remain for medium to long term.

A new era for the economy

Now, this isn’t all to say that Americans want to sit in their home forever. After a year locked up, they’re ready to break free and resume normalcy.

Vaccinated consumers are beginning to return to out-of-home activities and spending at near pre-pandemic levels, according to McKinsey. And consumers overall plan to spend extra on travel and mobility, out-of-home entertainment, and restaurants after the pandemic. But they’ve also “made substantial investments in their home life which they want to continue, even after the pandemic subsides,” the report reads.

The private consumption that gained foothold during quarantine finding its way into a post-pandemic landscape says a lot about the American mindset right now. For one, it’s likely that people realized both some of the conveniences and joys of a life at home, such as the ease of a meal kit or the luxury of sleeping in silk pajamas.

It also signals that for all the progress we’ve made, we’re not quite out of the pandemic just yet. The return to normalcy will be gradual, as many people need to more time to unfreeze from the trauma of the pandemic before transitioning to more out-of-home activities.

It’s also a sign of how the pandemic has introduced new ways of life. Some companies have announced long-term remote work options, and some Americans are ready to work from home forever. That means investing in a good home experience is more important than ever.

The predicted economic boomtime could usher in a new era in the US economy, one that will be reshaped by the pandemic. If consumer spending indicates anything, that will include a more pronounced desire for experiences, but also a more pronounced desire for being a homebody.

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It might be the worst time to remodel your house. Experts say customers can expect months of delays.

home buying
  • Home-improvement projects are being set back by months due to shipping delays and shortages.
  • The home-buying and remodeling boom has companies struggling to keep up with demand.
  • Skyrocketing lumber prices are also making projects increasingly expensive.
  • See more stories on Insider’s business page.

The pandemic caused a surge in home-improvement projects at the worst possible time and many companies are still struggling to keep up with backlogs of projects.

Over 44% of home improvement plans in the US have been delayed due to supply shortages and skyrocketing material costs, according to data from market research firm, Cardify.ai, a company that uses transactional data to generate reports on consumer spending.

Steve Cunningham the CEO of Cunningham Contracting and the chair of the National Association of Home Builders’ (NAHB) Remodelers Council said his projects are being delayed by months due to the limited availability of materials, as well as laborers. Data from the NAHB Remodeling Market Index indicates that, on average, home improvement projects are facing 1-2 months of delays.

Home construction
A red-hot real estate market has kickstarted new home construction, but builders face a shortage in lumber.

“A lot of remodelers have more business in front of them than they can service,” NAHB Chief Economist Robert Dietz told Insider.

John Bitely, the president of Sable Homes, a home-building company based out of Rockford, Michigan, told Insider that in 30 years of business he’s never seen such demand.

“We usually build houses to sell them,” Bitely said. “We have virtually none of those available right now because all of our labor and production is fully absorbed with creating pre-sold homes. Every home we’re making is already sold because people are chomping at the bit for these new homes and we can’t build our way out of it.”

Not only are home-improvement projects lagging due to spikes in demand, new homes have also become an incredibly hot market. Last month, mortgage giant Freddie Mac reported that there is a shortage of nearly 4 million homes in the US.

Government agencies are backed up

Bitely said Sable Homes faces delays from the very beginning of a project, as government agencies have been slow to give out the necessary home-building permits, adding at least two weeks to the waiting process.

He attributes the delay to the sheer amount of permits government agencies are rushing to approve as home-building demand continues to increase.

Josh Wiener, the founder of home-improvement firm Silver Lining Inc, told Insider it’s been difficult to get projects approved due to the COVID-19 regulations in New York City.

Once a project starts it can get stuck midway through

Supply shortages have been unpredictable in recent months. Cunningham told Insider he’s had projects where a kitchen remodel has been held up by the availability of the dishwasher model or refrigerator. Contractors currently expect to wait an extra 3-4 weeks for appliances to be delivered due to shipping delays and the global computer chip shortage, Cunningham said.

There have been times when Sable Homes has been forced to pivot from one project to another, as contractors wait on vinyl siding or plumbing pipes. Bitely said the company tries to compensate by ordering products well ahead of schedule, but they never quite know what products will be in short supply.

“The biggest problem is the shortage is random so it’s very difficult to fix or nail down,” Bitely told Insider. “Because it’s impacting nearly every facet of the supply chain, it will be difficult to make it go away.”

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While kitchen appliances have been heavily impacted by the global semiconductor chip shortage, other products like paint and vinyl siding are also in short supply due to the Texas freeze. Though, Dietz says the skyrocketing lumber prices are one of the biggest hurdles home-building and improvement companies are struggling to overcome.

“Lumber is a big component of any home project,” Dietz said. “It’s adding about $36,000 to new single family homes and it’s driving remodeling prices higher.”

Home-improvement projects are sure to be more expensive

It’s difficult to predict how much a project will cost.

Cunningham told Insider that his company has an escalation clause in their contract that the material costs may be subject to change. Bitely said he sees prices fluctuate every few weeks.

“As a company, there’s nothing we can do but pass those prices through to the customer,” Bitely said. “We set up the expectation early on that prices are changing and the project may be subject to delays and for the most part customers are not deterred.”

lowe's remodeling
A Lowe’s employee stocks lumber inside the home improvement store in New York.

Other companies have been forced to eat the rising material costs without an escalation clause in their contracts. Wiener said his company has been forced to pay for 100% of costs that are outside of the initial budget. He said Silver Lining has been lucky in that as a bigger firm they have been able to overcome the cost hurdles, while smaller firms might be forced out of business.

Despite delays and rising costs, demand shows no signs of dampening

“Right now, most clients are still going through with buying because they’re desperate for house. They have no other choice,” Bitely said.

Home-building and improvement delays and price spikes are not expected to abate anytime soon. On Thursday, Kyle Little, chief operating officer of Sherwood Lumber, told CNBC he expects elevated lumber prices to continue into the “foreseeable future.”

“It’s really imperative that policymakers improve these supply chains,” Dietz told Insider. “Lumber affordability is key to housing affordability.”

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Your home improvement project just got a lot more expensive. From dishwashers to paint and fertilizer, here are the goods in short supply.

hammer nail home improvement
  • Supply-chain issues have made home-improvement projects more expensive.
  • Shipping delays, as well as the Texas freeze, have emptied shelves at stores like Home Depot and Lowe’s.
  • From refrigerators to cabinets and windows, here are some of the items that are getting pricier.
  • See more stories on Insider’s business page.

Many home-improvement goods including appliances, paint, and fertilizer are getting more expensive as companies continue to announce price hikes to combat shortages and rising shipping costs.

Price tags on consumer goods have risen over 10% from a year ago, The Wall Street Journal reported over the weekend, citing NielsenIQ. Demand for home improvement items caused by the work-from-home boom has pushed prices to new highs and these price hikes are not showing signs of slowing down anytime soon.

The computer-chip shortage has made home appliances difficult to find

loading dishwasher

The global semiconductor shortage has impacted most electronics, from dishwashers and refrigerators to washing machines. And panic buying of products like freezers during the pandemic has only made the problem worse.

Last month, Consumer Reports announced freezers had sold out across the country, citing data from top retailers like Home Depot and Lowe’s. The product is not expected to be available until mid-summer, according to the publication.

Freezers are just one of many home appliances in short supply. National Housing Board (NHAB) Chief Economist Robert Dietz told Insider about 90% of appliance-delivery dates have been delayed and prices have skyrocketed in recent months.

Prices for home appliances have been climbing every week, according to the Josh Wiener, founder of home-improvement firm Silver Lining Inc. He told Insider he’s seen delivery dates for refrigerators that have been pushed into October.

Steve Cunningham, the CEO of Cunningham Contracting and the chair of the NHAB’s Remodelers Council, said there’s been times when entire remodeling projects have been delayed weeks just for dishwasher deliveries.

In March, Jason Ai, the president of Whirlpool in China, told Reuters that the company was facing difficulty sourcing the processors that power more than half of its product lineup, including washing machines, microwaves, and refrigerators.

The shortage has been going on for months and is only getting worse. Executives from Swedish appliance giant Electrolux said on a conference call in October that it had entered the quarter with “unusually low inventory levels,” despite higher production levels.

“The increased time spent at home during the pandemic has resulted in more intensive use of appliances and higher share of household budgets allocated to home improvement,” executives said at the time.

Wiener told Insider that his company has been working to order the items well ahead of time, but they have also seen shortages of the tools needed to hook the appliances up.

The Texas freeze made paint, windows, and vinyl siding more expensive

Men painting a house home repairs paint
Men painting a house. (The house pictured is not the Curcuru’s.)

Anything that includes resin – vinyl windows, PVC boards, plumbing pipes, and electrical conduits – has become increasingly valuable since the Texas storms. The February deep freeze in the state shut down resin plants and has made windows and vinyl siding increasingly expensive.

The storm also led to a hike in prices of plumbing fixtures, as the storm caused a spike in the repair of burst pipes, Dietz said.

The Texas storm reduced the nation’s capacity to refine petroleum, which means a reduced ability to manufacture nearly all paints. It can be hard to predict which latex paint products will be out of stock and prices are continually fluctuating, Wiener told Insider.

“A lot of it is hit or miss,” he said. “Most of the places we would normally buy from are sold out. Lately we have been forced to pivot and find new vendors.”

Lumber prices have pushed flooring, cabinets, and deck prices higher

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Lumber accounts for about 20% of a home, according to John Bitely, president of Sable Homes. He told Insider the record lumber prices have forced his company to raise their home-building prices.

Lumber prices are adding about $36,000 to new single-family homes, according to Dietz.

“As a company, there’s nothing we can do but pass those prices through to the customer,” Bitely said.

Any item that is made out of wood is facing significant price hikes and shortages, Dietz told Insider. From cabinets to flooring, decking, and doors, the products’ prices are skyrocketing along with lumber prices, which Dietz expects won’t slow down until well into 2022.

Price tags on outdoor gear are also spiking

Outer outdoor furniture

Increased interest in stay-at-home options, including staycations, has created a renewed interest in outdoor home improvement. Dietz told Insider that one unusual shortage is a lack of cushions for outdoor furniture.

Lawn and garden-care products have also had price hikes in recent months. Last week, Scotts Miracle-Gro announced during its quarterly earnings call it would increase prices by single-digit percentages, after record sales in 2020.

“I don’t think we have a choice here,” the company’s CEO Jim Hagedorn said. “Every raw material we’re buying right now is at a materially higher cost than we had planned.”

It has been difficult for companies to adapt.

“The biggest problem is the shortage is random so it’s very difficult to fix or nail down,” Bitely told Insider. “Because it’s impacting nearly every facet of the supply chain, it will be difficult to make it go away.”

Dietz told Insider he doesn’t see a clear end in sight for the supply-chain issues.

“The advice I give builders and remodelers is that at least for the duration of this year we are going to see an increase in the pricing for our materials,” Dietz said. “It’s an unsustainable trend and it’s imperative for policy makers to improve these supply chains.

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Americans focused on nesting during the coronavirus pandemic help lift US holiday shopping sales

woman paying on phone online shopping
  • Holiday shoppers in the US spent 3% more than the previous year, led by online spending spikes on furniture and home improvement, says Mastercard.
  • “They shopped from home for the home, leading to record e-commerce growth,” Steve Sadove, senior advisor for Mastercard, said in a statement. 
  • Online sales in the 75 days prior to Christmas jumped 49% from the same year-earlier period, the company said. 
  • Visit Business Insider’s homepage for more stories.

Holiday shoppers in the US spent 3% more than the previous year, led by online spending spikes on furniture and home improvement.

As might be expected, online retail boomed as in-person lagged, according to data released Saturday by Mastercard. 

The company said online sales in the 75 days before Christmas jumped 49% from the same year-earlier period. 

The biggest bump over last year came in home improvement, continuing a yearlong trend. As people stayed home during the pandemic, they spent more on making their surroundings comfortable. Online home improvement sales soared about 80%.

“American consumers turned the holiday season on its head, redefining ‘home for the holidays’ in a uniquely 2020 way. They shopped from home for the home, leading to record e-commerce growth,” Steve Sadove, senior advisor for Mastercard, said in a statement. 

Holiday shoppers seemed to be focused on nesting, as online furniture and furnishing sales climbed 31%, and electronics and appliances climbed 6%. 

A rise in overall holiday spending – even by just 3% – will likely be met with cheers from retailers, many of which have had a difficult year bringing customers in.

“And, consumers shopped earlier than ever before. Across our expanded 75-day holiday shopping season, sales were up 3.0%, a testament to the holiday season and strength of retailers and consumers alike,” said Sadove in a statement. 

The holiday shopping season is marked off differently by some firms, but for many, it begins on the day after Thanksgiving, so-called Black Friday. Foot traffic on that day in US stores had fallen 52%, while online sales climbed 22%, according to Sensormatic Solutions. Mastercard said on Saturday that sales that day fell 16% year over year. 

But “Thanksgiving weekend through Cyber Monday remained a key time for shoppers, with Black Friday being the top spending day of the 2020 holiday season,” Mastercard said in a statement. 

In-store retail sales for items that are usually holiday staples slipped, as expected. In-person clothing sales dropped 19%, while luxury items dropped 21%, according to Mastercard.

In-person jewelry sales slipped 4%, while online sales rose 45%, according to Mastercard. 

Overall, in-person department store shopping fell 10%, but rose about 3% online. 

“Buy online, pick up in-store as well as technologies like contactless were key for retailers this season,” said Mastercard. 

About 38% of US shoppers had planned to spend less this holiday season, according to a study from Deloitte.

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