How the U.S. economy drowned the swimming pool industry

The big picture: Just 60,000 residential, in-ground pools will be constructed this year, one research firm estimates — half as many as in 2021.

• Pool Corp., which distributes pool supplies and equipment, said last week that pool construction would be down as much as 20% from last year.
• If the market continues to weaken further, there could be fewer new pools built than the 54,000 that were constructed in the Great Recession year of 2009, following a spectacular nationwide housing bust.

Where it stands: Higher-end pools that have fancy waterfalls or decorative tiling are selling fine. It's demand for low-end pools that is slowing.

• One reason: High-end pool buyers tend to pay in cash. Lower-end pools are more likely to be financed, and high interest rates have made that less palatable.
• "The middle-to-lower income consumers are strapped and out of gas," Ryan Merkel, who follows the pool market for William Blair, tells Axios.

Zoom out: New pools are a popular addition when Americans buy a new home. With home sales plummeting, there are fewer such buyers.

• Rate-locked homeowners have seen their home prices rise in value, but tapping that equity for, say, a pool installation looks very expensive.
• On top of that, the sluggish housing market means there is "not as much competition for upper-middle housing stock, where a pool is a differentiating amenity," according to Rick Webb, the CFO of pool-building company Viridian Pools.

Zoom in: Normally, new home construction is correlated with new pool construction. That's not the case anymore.

• "New home construction grew versus a decline in new pool construction," Pool Corp. noted in its annual report (though they added this creates "more available backyards for swimming pools when economic conditions stabilize.")

By the numbers: The price of a pool has been rising even as demand has slowed.

• The average pool cost went from roughly $40,000 pre-pandemic to somewhere north of $65,000, estimates Garik Shmois, an analyst at Loop Capital.
• Discounts, at least for some companies, are making a comeback. Pool equipment provider Hayward says promotional activity is back to pre-pandemic trends.

Between the lines: The pandemic caused a one-off surge in pool demand: stuck-at-home were inclined to lean into upgrades, even as they were forced to forgo vacations.

• "We are seeing record travel. That shows people are choosing to go back to summer vacations, spending their discretionary budgets on activities as opposed to reinvesting in their backyards," Shmois says.

The bottom line: Just like the broader economy, the water's getting colder in the pool industry.