Skynesher | E+ | Getty Images
Fewer homeowners have taken on remodeling projects, according to reports. But don’t mistake this for a slow market.
The leading indicator of remodeling activity, an outlook measurement of home improvement and spending on repairs to owner-occupied dwellings, peaked at 17.3% in the third quarter of 2022. LIRA has since declined and fell 1.2% in the first quarter of 2024 compared to the previous quarter.
The NAHB/Westlake Royal Remodeling Market Index from the National Association of Home Builders reflects a similar decline. The RMI, which measures reformers’ sentiment about the market, peaked at 87 points in the third quarter of 2021, and like the LIRA, has been steadily declining since then. In the first quarter of 2024, the the measure fell at 66 points, down one point from the previous quarter.
But RMI is still in territory where more remodelers see conditions as “good” than “bad,” said Robert Dietz, NAHB chief economist.
In a release for the first quarter of the group reportNAHB Remodelers President Mike Pressgrove noted that “demand for remodeling remains strong, especially among customers who do not need to finance
projects at current interest rates’.
Covid lockdowns, inflation affect remodeling activity
The height of the Covid-19 pandemic brought with it an explosion of home renovation activity.
Homeowners were eager to invest in the spaces they spent so much time in: updating key spaces like kitchens and bathrooms, building home offices and adding pools.
Some also had savings from stimulus checks and from activities they couldn’t do during early lockdowns — and plowed that money back into home improvements and renovations, said Abbe H. Will, senior research associate and associate director of Remodeling Futures at the Joint Center for Housing Studies at Harvard University. In 2021, owners used cash from savings to pay for nearly four out of five projects, according in a JCHS exhibition.
“We’re from such high levels of spending,” Will said.
More from Personal Finance:
Scientists are predicting an “extremely active” storm season
Why New Construction Home Buyers May Face a Property Tax Surprise
How mortgage rates affected the spring housing market
As savings from the Covid era have dried up, so has this boost to activity.
Homeowners are doing smaller renovations more and more. However, they are spending more per project, in part because of broader and higher inflation Court fees for materials and constructions.
Homeowners spent an average of $9,542 for home improvements in 2023, a 12 percent increase from a year ago, according to State of Home Spending by Angi. At the same time, the volume of projects decreased to an average of 2.8 projects in 2023 from 3.2 in 2022. The survey surveyed 6,400 consumers between October 22 and 23.
An increase in spending on home improvements, along with a decrease in projects, suggests that inflation is eroding household budgets, according to the home services website.
“We haven’t built many new homes”
While home improvement activity is expected to moderate further from pandemic highs, remodelers remain busy at work.
Contributing to demand: Homeowners are living in their homes longer and the existing US housing stock is aging. Both factors will require homeowners to invest in maintaining their properties, experts say.
As of 2024, the typical tenure of a homeowner in their home is 11.9 years, according to Redfin, a real estate brokerage website. This is nearly double the 6.5-year average in 2005.
It is largely driven by baby boomers who are aging in place. Nearly 40 percent of boomers have lived in their homes for nearly 20 years, while 16 percent have stayed in their home for at least a decade, Redfin found.
“Aging-in-place remodeling” has become a large subsector in the remodeling market as baby boomers move into their retirement years, Dietz said. Instead of relocating, some retirees plan to stay in their neighborhoods or near family.
“But that means they’re investing in their homes, whether it’s energy efficiency items [or] safety items like light fixtures and railings,” Dietz said.
However, the real driver for renovations is an aging housing market. In 2021, the median age of all owner-occupied homes was 41 years, according in the 2021 American Housing Survey from the US Census Bureau. Homes built in the 1980s or earlier make up about 60% of the existing stock; according in an analysis of US Census data by the NAHB.
“It really speaks to the fact that we haven’t built a lot of new housing over the last decade. This aging housing stock is going to require investment,” Dietz said.