BLOG — Sept. 11, 2025
The US Home Improvement Market: Trends and Challenges Ahead
The US home improvement market is facing a unique set of challenges and trends shaped by economic factors including interest rates, tariffs, and labor market dynamics. In this blog post, we shed light on the current landscape and what the industry can expect in the near future.
How could tariffs impact the home improvement market?
Tariffs continue to be a critical topic in the home improvement industry. Recent changes, such as the end of the de minimis exemption, have increased costs for small businesses, making it more challenging to manage pricing and margins.
While Canada has removed reciprical tariffs on USMCA goods, companies may need to adapt to higher tariffs on imports from countries like India and the ongoing adjustments in supply chains. The EU and the US have reached a written framework for a trade deal, although the deal has not yet been finalized. This illustrates the persistent uncertainty around tariff levels.
Tariffs lead to increased prices for goods, contributing to inflation and complicating the affordability of housing. The Federal Reserve noted in August that we're now beginning to see that appear in the inflation numbers, with a modest uptick in some of the goods inflation numbers.
As companies navigate these challenges, they must also consider the impact on their supply chains, which may delay projects if parts are unavailable. The uncertainty surrounding trade policy is complicating business decisions, making it crucial for companies to stay informed and agile.
How does the interest rate environment influence the home improvement market?
The current interest rate environment presents significant hurdles for homeowners and the housing market. We see a "rate lock log jam," where many homeowners are hesitant to sell due to the disparity between their low mortgage rates and current higher rates. This situation has resulted in a stagnation of the housing market, with fewer transactions taking place. Existing home sales are down about 1% in 2025.
The Federal Reserve is expected to begin cutting rates this year, potentially easing the log jam and encouraging more activity in the housing market by the second half of 2026. While the recovery may not be immediate, we anticipate that existing home sales will increase by approximately 10% next year, albeit from low levels.
What trends are we expecting in home improvement projects?
With many homeowners opting to stay put due to high interest rates, we are witnessing a shift in the types of home improvement projects being undertaken. Instead of major renovations, homeowners are focusing on essential repairs and minor upgrades, such as roofing, painting, and other necessary work to maintain their homes.
While discretionary upgrades may decline, there will be an uptick in projects that homeowners feel compelled to address as they settle in for the long term. This trend indicates a significant shift in spending patterns, moving away from luxury renovations to essential maintenance.
Overall, the home improvement market should see modest positive growth.
What labor market challenges is the home improvement industry facing?
The home improvement sector is grappling with labor market challenges, particularly in finding skilled workers for factories and knowledgeable workers for stores. In construction, about 2 million workers are non-college-educated immigrants, including roughly half of roofers, painters, and drywall installers working in the US.
As the housing market rebounds, the competition for labor may intensify, leading to potential increases in labor costs and project delays.
How could the recently passed US tax and spending bill impact the home improvement market?
The recently passed US tax and spending legislation has implications for consumer confidence. By maintaining current tax rates, the bill prevents a potential decrease in consumer spending that could have resulted from increased taxes. While the direct impact on home improvement spending may be limited, the stability in tax rates is expected to bolster consumer confidence in the long run.
From tariffs and interest rates to labor market challenges, companies must remain vigilant and adaptable. While the outlook for home improvement projects may appear subdued, the focus on essential repairs and maintenance presents opportunities for growth in a changing landscape.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.