# High Interest Rates Squeeze Remodeling, Cabinet Orders Slip in Late 2024
For much of the post-pandemic era, the kitchen and bath remodeling market enjoyed a prolonged boom. Homeowners flush with equity and low-rate mortgages funded major renovations, keeping cabinet manufacturers and dealers busy. But the tide has turned. The Federal Reserve’s decision to keep interest rates elevated through late 2024 is now casting a long shadow over the home improvement sector, directly impacting demand for kitchen cabinets. Recent data paints a clear picture: remodeling activity is cooling, and cabinet orders are falling.
The Macro Picture: Remodeling Spending Set to Decline
The most authoritative near-term forecast comes from the Joint Center for Housing Studies at Harvard University. The Leading Indicator of Remodeling Activity (LIRA) projects that home improvement spending in Q4 2024 will be 1.5% lower than the same quarter in 2023 [1]. While a single-quarter dip may not sound catastrophic, it represents a significant reversal after years of solid growth. The LIRA measures national owner-occupied home improvement expenditures, and its projection reflects the cumulative effect of higher mortgage rates, elevated financing costs for renovation loans, and a general pullback in consumer discretionary spending.
This decline is not an isolated event. The NAHB Remodeling Market Index (RMI), which surveys remodelers on current market conditions, fell to 67 in the third quarter of 2024, down from 71 in the second quarter [3]. An RMI above 50 indicates that more remodelers view market conditions as good rather than poor, but the sequential drop signals a tangible slowdown. The current market conditions component, which captures major additions and alterations, was especially weak. For cabinet suppliers, this means fewer large-scale kitchen remodels are starting.
Cabinet Manufacturers Feel the Pinch
MasterBrand, Inc., one of North America’s largest cabinet manufacturers, provided concrete evidence of the slowdown in its Q2 2024 earnings release. The company reported net sales of $1.26 billion for the first half of 2024, down 5% from $1.33 billion in the same period of 2023 [2]. In its commentary, MasterBrand explicitly cited “weaker remodeling demand due to higher interest rates” as a key driver of the decline. This is not just a single-company anomaly; as a bellwether for the industry, MasterBrand’s results suggest the broader cabinet market is contracting.
The impact on cabinet manufacturers cascades down the supply chain. Dealers who had been stocking up in anticipation of continued growth now face inventories that are turning over more slowly. For kitchen designers, the pipeline of new projects is thinning. Builders, who often spec cabinets for new homes and major renovations, are encountering delays as homeowners pull back.
New Construction Adds Another Headwind
The remodeling slump comes at a time when new housing construction is also slowing. According to the U.S. Census Bureau, housing starts in August 2024 declined 6.8% to a seasonally adjusted annual rate of 1.356 million units [4]. Fewer new homes mean fewer opportunities for cabinet installation in new builds, which is an important channel for many cabinet dealers and manufacturers. The combination of a remodeling slowdown and weaker new construction creates a double drag on cabinet demand.
Lower housing starts are directly tied to high mortgage rates, which have pushed many potential homebuyers to the sidelines. Builders, in turn, have reduced their starts to avoid being left with unsold inventory. For cabinet suppliers who serve the production builder segment, this means order volumes are shrinking. Some builders are also shifting to smaller, more affordable floor plans that require fewer cabinets, further damping demand on a per-unit basis.
Implications for Cabinet Dealers and Kitchen Designers
Expect Fewer Large Remodeling Projects
The LIRA projection and the RMI drop indicate that homeowners are delaying expensive, discretionary renovations. Kitchen remodels typically cost between $15,000 and $50,000 or more, and financing these projects is becoming more expensive with interest rates on home equity lines of credit (HELOCs) and personal loans rising. Dealers should expect a higher proportion of smaller, cosmetic updates—such as refacing or painting existing cabinets—rather than full tear-outs and replacements. Designers may need to pivot their pitches to emphasize budget-friendly solutions.
Inventory Management Becomes Critical
With slower sales, dealers must be careful not to overstock. MasterBrand’s 5% sales decline suggests that many dealers have already cut their purchases. Those who continue to hold high inventory levels may face carrying costs that eat into margins. Manufacturers may offer incentives to move stock, but dealers should resist the temptation to overbuy merely because of discounts. A leaner inventory strategy, with more reliance on just-in-time ordering, could be prudent.
Pricing Pressure Mounts
As demand softens, competition for the remaining projects will intensify. Dealers may be forced to offer discounts or value-added services to win bids. Manufacturers, facing lower volume, might raise prices to protect margins—but this could backfire if dealers and builders resist. The net effect could be a compressed margin environment for the entire channel. Designers should be transparent with clients about potential price increases and longer lead times if production slows further.
Shift in Project Mix
The decline in housing starts and remodeling activity will likely shift the project mix away from new construction and major renovations toward smaller-scale projects. For example, cabinet dealers might see more orders for individual cabinets or small sets—like a single bathroom vanity or a kitchen island—rather than whole-house packages. Kitchen designers should be ready to offer modular or semi-custom solutions that can be delivered quickly and installed without extensive construction.
What Builders and Procurement Professionals Should Watch
For builders, the 6.8% drop in housing starts [4] means fewer opportunities to spec cabinets in new homes. Those who depend on production building will need to diversify into remodeling or light commercial work. Procurement teams should renegotiate contracts with cabinet suppliers to reflect lower volumes and seek more flexible terms. The risk of supplier consolidation is real: if manufacturers see prolonged weakness, they may shutter plants or reduce product lines, which could limit options later.
Builders should also keep an eye on lead times. While slower demand may shorten lead times today, any sudden uptick—perhaps spurred by a surprise rate cut—could cause bottlenecks. Maintaining good relationships with multiple cabinet sources is advisable.
Regional Variation Matters
The national data hides local disparities. Markets in the Sun Belt and Mountain West, which saw rapid home price appreciation and heavy construction, may experience sharper downturns as high rates cool speculative activity. In contrast, markets in the Northeast and Midwest, where existing home sales remain steadier, could see more resilient remodeling demand. Cabinetry professionals should analyze their local building permit and housing data to calibrate their expectations.
Looking Ahead: A Tepid 2025?
The current interest rate environment shows no signs of imminent easing. The Federal Reserve has indicated it will maintain rates until inflation is sustainably under control, which may not happen until mid-2025 or later. This suggests that the headwinds for remodeling and cabinet demand will persist for at least the next several quarters. The LIRA projection for Q4 2024 is just one point; if rates remain high, further declines in 2025 are possible.
However, there are some silver linings. Household balance sheets remain strong overall, with homeowners holding significant equity. Many potential renovators are simply waiting for borrowing costs to decline before committing to large projects. Pent-up demand could be released quickly once rate cuts begin. Cabinet dealers and designers who maintain strong customer relationships and stay nimble will be best positioned to capture that rebound.
Conclusion
The evidence is clear: persistent high interest rates are dampening home remodeling activity, leading to reduced demand for kitchen cabinets and slowing growth for manufacturers. The LIRA’s 1.5% projected decline in Q4 2024 home improvement spending [1], MasterBrand’s 5% drop in first-half sales [2], the NAHB RMI slipping to 67 [3], and the 6.8% fall in housing starts [4] all point to a market that has shifted from boom to slowdown. Cabinet dealers, kitchen designers, builders, and procurement professionals must adapt to this reality by managing inventory carefully, adjusting project mix, and preparing for a period of tepid demand. Those who plan for a prolonged slowdown while staying ready for a turnaround will navigate the headwinds most effectively.