Yahoo Finance’s Brian Sozzi and Julie Hyman speak with National Kitchen & Bath Association CEO Bill Darcy about how the global chip shortage is impacting home remodeling.
BRIAN SOZZI: Semiconductor shortage is roiling all sorts of industries, from auto producers to cigarette makers. Appliance makers are not being spared either, as we just learned from our chat with Whirlpool CFO Jim Peters earlier this morning. And that may spell bad news for the country's home remodeling boom. Bill Darcy is the CEO of the National Kitchen and Bath Association. And he joins us now. Bill, good to see you again.
Before we talk about the chip shortage, you know, we just talked to Whirlpool's CFO Jim Peters. And he said he-- in some products, he has raised prices close to 12% because of inflation. How much more expensive is it going to be for the average homeowner to remodel their home this year?
BILL DARCY: Yeah, Brian, thanks for-- and Julie, thanks for having me. Supply chain issues and cost of materials are the top concerns of NKBA members. Long lead times and price increases are significantly impacting our members, and certainly, consumers. Interestingly enough, though, the health of the industry is as strong as ever. And our members are predicting 11% sales growth in 2021, as we've said today.
JULIE HYMAN: So how much of that sales growth is price increase versus demand increase? I mean, we've talked anecdotally about the housing boom that we were seeing in the suburbs. And presumably, that's fueling a lot of the demand. But how much are members also raising prices for their services?
BILL DARCY: You know, most consumers, as you are both, when you have a project and you are on a fixed budget, consumers will try to really stay within that budget. So, many times, it impacts the cost of the items they select and maybe modifying the selection, but it has not really impacted demand as of yet. The pent-up demand pre-COVID, outdated housing stock, homes nearly 40 years old in the US. We had all the strong fundamentals going into COVID. Then you had the pandemic boom, really, with working from home and all those things.
So all those drivers really contributed to the robust market. However, certainly, the supply chain disruptions and cost of materials is having a big factor. It's a matter of the consumers navigating that, too. It seems to be not restricting them from doing the project. They're just making different decisions about product choices and things like that.
BRIAN SOZZI: And Bill, last time we spoke, too, was really, I think, in the height of the pandemic. And a lot of folks were remodeling their homes, new air filtration systems, in large part, probably because of the pandemic, new touchless faucets. What are some of the biggest projects this year, though?
BILL DARCY: Yeah, the smart home tech, and certainly, with the microchip shortage with the amount of demand there is for products that have microchips in them, has had a big factor. You know, so you look at, really, all the different products that have supported that demand. And you kind of create the environment that we have. So there is a lot of just pure interest in that. You know, people still working from home and looking at those spaces, wanting to improve those spaces, and really good news for NKBA members.
If you are looking at doing those projects, I do encourage consumers to really plan ahead. I had a conversation with a college roommate the other day. And they were telling me-- get my insight on a kitchen project they were working on. And I said, when are you going to do this? I don't know, next month. And I said, probably not next month. I mean, you really have to plan ahead, both from working with an NKBA member, working with your contractor, and ordering those appliances as soon as you can.
JULIE HYMAN: Yeah, I mean, that seems to me to be a pretty big problem, Bill, you know, because as you said, some people are making different choices based on what's available, based on cost. Like, if you're looking at appliances, I don't know if anything's-- you know, there's some across the board issues in part because of the chip shortage as well. So, you know, even if one of your members can do a kitchen, you know, are they then going to have to-- do they delay the project to wait for the appliances? Do they do the project and then put the appliances in later? I mean, it would seem to present some pretty unique challenges here.
BILL DARCY: It does. And a lot of our members I've been talking to are getting pretty creative with this, as you said, Julie. You really don't want to limit the whole flow of the logistics because if you back up a job, then it's just going to compound the issue going forward. So we found a fair amount of members are using these, you know, what products can they get, especially on the appliance side? Even if the ultimate consumer choice is not that product, they will put a kitchen together with some appliances that can maybe be swapped out when the other appliances come in.
So, it's really our members are using a lot of creativity in this market. But because the demand is so strong and the consumer's desire is so strong, really postponing it is not the ideal solution. So they're just kind of keeping it moving and being creative. And I think a lot of the-- a lot of the factories and things are really doing everything they can to get back online.
The Suez Canal and certainly with the microchips and all these component parts that you might not think about, that's the reason why the product is delayed, not the whole entire refrigerator is not completed, just one or two components, that type of thing. You really have to be creative based on the consumer's interests and demand and working within the contractors and designers' means because they have so many projects they're trying to work with at the same time.
BRIAN SOZZI: So, in other words, Julie, be creative with your kitchen remodel. I look forward to seeing the photos for sure. We'll leave it there. Bill Darcy, CEO of the National Kitchen and Bath Association, good to see you again.