Why are kitchens getting more expensive?

What we are reading…
INDUSTRY INSIDER JUN 13, 2019 

For the past eight years, Houzz has been releasing an annual report on the state of the home renovation industry. Along with a fairly clean bill of health for the market, this year’s survey, based on 140,000 respondents, includes a breakout number: In 2018, the average spend on kitchens spiked a whopping 27 percent to a median of $14,000. What’s going on?

The answer, unsurprisingly, is complicated.

Houzz attributes the unprecedented jump to a variety of factors, starting with the trade conflict with China. “Last year’s 10 percent increase in tariffs on imported building materials is likely one of several forces hitting consumer pockets,” says Nino Sitchinava, Houzz’s principal economist (yes, Houzz has a principal economist). “Kitchen remodels are heavily dependent on imports of cabinetry, countertops, ceramic tile, plumbing fixtures and vinyl flooring from China.”

Why are kitchens getting more expensive?

A Spanish Revival kitchen by Sarah Blank  Stacy Bass

Ten percent tariffs, however, are nothing compared with the massive import duties currently being charged on the quartz used to make stone countertops. Last April, Minnesota-based surfaces company Cambria filed a petition alleging that Chinese companies, subsidized by their state government, were dumping quartz into the U.S. market, artificially lowering prices. The government provisionally ruled in Cambria’s favor in September, and since then, duties on imported Chinese quartz have been slapped with tariffs ranging from 178 percent to 348 percent. The ruling was upheld again just this week, meaning that many countertop fabricators that had been relying on imported Chinese quartz will continue to face pressure to raise their prices.

According to Houzz, the increased price of a kitchen redo isn’t exclusively tied to matters of international diplomacy. Sitchinava says that the company’s survey indicates that demographic shifts are at play as well, with “a massive generation of baby boomers and Gen Xers doubling down on their dream kitchens.” And though the uptick in price has happened across the board, she says it’s strongest at either end of the price spectrum, with the biggest changes happening for both the cheapest and most expensive kitchens.

As long as the value of the home increases as well, most clients are not very concerned. But if this bubble breaks, these higher prices will have to retract.

MATTHEW QUINN

However, Houzz’s number is a statistical median, and certainly doesn’t apply to all kitchens everywhere. Sarah Blank, a Greenwich, Connecticut–based kitchen designer who has worked with everyone from Bunny Williams to Fairfax & Sammons, says she hasn’t noticed a particularly abnormal increase in prices recently. Consumers are still renovating kitchens, she says, but watching budgets carefully. “In this area, people are very conscious about what they’re spending, due to changes in the tax law,” she tells Business of Home. “Real estate taxes are astronomical, and houses aren’t selling. People know they have to redo an outdated kitchen in order to sell their home, but they’re very conscious of price.”

Matthew Quinn, the principal of Atlanta-based Design Galleria (and the founder of the Matthew Quinn Collection, an architectural hardware line), says he’s noticed some price hikes in his business, but nowhere near 27 percent. “The cost of appliances, cabinets, stone and lighting has increased about 10 percent since the beginning of 2018,” he says. “Labor is what could be making up that additional 17 percent. In Nashville, for instance, the cost of labor has increased beyond that. But here in Atlanta, that number is more like 10 percent.”

Like Blank, Quinn sees the price of kitchen remodels as deeply tied to the overall housing market—though the numbers in his region look different than in Blank’s. “As long as the value of the home increases as well, most clients are not very concerned,” he says. “But if this bubble breaks, these higher prices will have to retract.”

Houzz, for its part, thinks the number is going up, not down—for political reasons. “Given the recent breakdown in trade negotiations,” says Sitchinava, “we expect similar effects to take place in 2019.”

Homepage: Kitchen by David Cook of Design Galleria Kitchen and Bath Studio; photo by Christina Wedge

Why are kitchens getting more expensive?

Our Take:

Chinese tariffs and the trade negotiations with China have nothing to do with rising kitchen prices. The tariffs went into effect in late 2018 and the Chinese so far are absorbing tariffs. Luckily the author contacted Cambria whose take made the most sense- the Chinese play hardball in all markets. They enter a market with a business that they underwrite, they kill off their American competitors by selling below cost (dumping). Once they have market share, they raise prices. This is why a proper Trade Agreement with China is so important. The real reason for any increases in kitchen prices has to do with competition, real estate and personal preference. Kitchens long ago stopped being utilitarian and have now become a status symbol.

The owners and management of Houzz make no secret of their political inclinations but save me from having it inserted into a survey about kitchens.

What is clear from the reporting here is that like the housing market in general, all the movement is on the top and on the bottom. The top of the kitchen market is completely controlled by professionals- designers, architects, contractors, and shelter magazines where the individual luxury items advertise. The bottom of the market is controlled by the manufacturers and online sites and box stores that sell their products.

A simple glance at the markets and malls of America shows that the mid range appliance stores and self help kitchen design stores along with their partners in the tile and flooring industry are suffering. They are closing at a record pace unable to compete with the large box stores that now offer design consultation and installation. Although, I am not sure you can call it consultation if they already know what they are going to sell the customer- and already plan to finance it for them.

This is where Houzz misses the mark.  You can cull from the survey that it is the MID MARKET that is weak.  Incredulously this is also the Houzz customer base and upon whom they rely, beautiful luxury kitchen photos aside.  So why not embrace the situation. After all it is from the mid market that creation and trends sprout forth. Young designers and home owners who plan to live in their homes and use the kitchens will create the new market-limited as it may be. This is where the industry needs to re-brand and relaunch and it is industry leaders like Houzz that should be at the forefront of this rebirth. The mid market designer can truly offer choice and consultation. This group also holds manufacturers accountable. Better for the consumer and better for the industry.

I don’t want or need Houzz to tell me that kitchens are getting more expensive. I would prefer them to spend their survey dollars coming up with an algorithm that would calculate for the home owner and designer how much value they can add to their home with a kitchen redo. Because with that knowledge, the consumer can confidently move forward and so follows the banks who will be able to compete for that financing- and the manufacturers that will hit those price points. When the mid market expands: creativity increases, trends develop, people work and businesses thrive. So come on Houzz! be part of the experience- don’t just examine it from afar. And for heavens sake- leave politics out of the kitchen.   -DD

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s