Thinking about remodeling? You’re not alone. According to a report from the Harvard Joint Center for Housing Studies, spending in this sector is up more than 50 percent in the United States since 2010.
The study found that, “Spending on improvements and repairs to the US housing stock continued on an upward trend in 2017, setting a new high of $424 billion. This represents a 10 percent increase from 2015 and more than 50 percent gain from the low in 2010.” According to their analysis, 22 million homeowners across the country completed at least one home improvement project in 2017, the last year studied.
“The report, which charted changes in home renovation activity through 2017, attributed part of the increase to a shortage of new construction and a reliance on aging housing stock that requires upkeep and repair,” said the New York Times. “Other factors include higher housing prices that have increased the available equity for home improvement loans, and a growing population of older homeowners who are financially equipped to pay for renovations.”
The primary “spenders” are spread among three main sources: Homeowners using surging equity to make improvements; others playing catch-up on deferred maintenance and much-needed updates; and “a significant increase in spending by rental property owners,” they said. It should be noted, however, that owner-occupied homes made up the largest segment of the remodeling market, “accounting for fully 55 percent of total expenditures in 2017.” Not surprisingly, the average spend was higher in places where price appreciation was the most robust.
A fourth driver is the aging population, “given that households age 55 and over not only have higher homeownership rates, but many also have the resources to pay for renovations and replacements,” they said.
The average expenditure on home improvement was rather modest; 40 percent of participants reported spending a total of less than $2,500, and almost 75% spent less than $10,000. “Even so, owners that completed large projects accounted for a significant share of the $233 billion homeowner improvement market in 2017,” they said. “Indeed, owners spending $50,000 or more contributed a third of national improvement outlays, while owners spending at least $25,000 contributed over half.”
Most popular home improvement categories
From a historical standpoint, homeowners typically allocate about 40% of their total expenditures on replacements and upgrades. In this study, the percentage was higher.
“Coming out of the last downturn, however, the replacement share climbed to almost 50 percent, where it has remained,” they said. “The growing focus on interior and exterior replacements and system upgrades likely reflects necessary investments deferred during the recession. The aging of the housing stock is also a factor. With homebuilding activity still below historical averages, the median age of owner-occupied homes nationally rose to 39 years in 2017, up from 32 years in 2007 and 29 years in 1997.”
Homeowners’ desire for increased energy efficiency also plays a role. The report shows that “many common replacement projects are also directly related to home energy use. In 2017, homeowners spent $68 billion—29 percent of total owner market expenditures—on improvements to roofing, siding, windows, doors, HVAC systems, and insulation. All of these types of projects have the potential to generate large energy savings. In fact, over 17 percent of homeowners cited energy efficiency as the motivation for their projects, up from 11 percent in 2013.”
Most common improvements
The most common project in 2017 was adding/replacing flooring, with 5.2 million homeowners, or 7 percent, reporting. The other most common projects included:
• Adding or replacing plumbing fixtures
• New windows or doors
• Built-in dishwashers or garbage disposals
• New water heaters
“Nearly 1 in 4 homeowners had some type of replacement project in 2017 to update home components or systems, compared to 9 percent of owners making improvements to their lot or yard (such as driveways or walkways, fencing or walls, sheds, landscaping, etc.) and 8 percent making discretionary improvements (including kitchen and bathroom remodeling, room additions, and porches or decks),” they said.