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Reports show that fewer homeowners are undertaking remodeling projects. But don't mistake it for a slow market.
The leading index of remodeling activity, a forecast that measures home improvement and spending on repairs for owner-occupied homes, peaked at 17.3% in the third quarter of 2022. The Turkish lira has weakened since then, and was down 1.2% in the first quarter of 2024 compared to to the previous quarter.
The National Association of Home Builders' NAHB/Westlake Royal Remodeling Market Index reflects a similar decline. The RMI, which measures remodelers' sentiment toward 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 scale fell to 66 points, down one point from the previous quarter.
However, the RMI remains in the region where more reshapers see conditions as “good” rather than “bad,” said Robert Dietz, chief economist at NAHB.
In a statement to the group's first-quarter report, Mike Pressgrove, president of NAHB Remodelers, noted that “demand for remodeling remains strong, especially among clients who do not need to finance their projects.”
projects at current interest rates.”
Covid lockdowns and inflation impact remodeling activity
The peak of the COVID-19 pandemic brought a flurry of home renovation activity.
Homeowners were eager to invest in spaces they were spending a lot of time in: updating key spaces like kitchens and bathrooms, building home offices and adding swimming pools.
Some also had savings built up thanks to stimulus checks and from activities they couldn't do during the early lockdowns — and they redirected that money toward home improvements and remodeling, said Abby H. Weil, co-lead researcher and associate director of Harvard's Department of Remodeling Futures. Its design. 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 to the JCHS report.
“We have achieved high levels of spending,” Weil said.
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As savings dried up in the Covid era, so did this surge in activity.
Homeowners are remodeling less and less. However, they are spending more on each project, partly due to broader inflation and higher costs of materials and construction workers.
Homeowners spent an average of $9,542 on home improvements in 2023, a 12% increase from the previous year, according to Angi's State of Home Spending report. Meanwhile, the number of projects fell to an average of 2.8 projects in 2023 from 3.2 in 2022. The survey included 6,400 consumers between October 22 and 23.
The increase in home improvement spending, coupled with a decline in projects, suggests that inflation has eroded household budgets, according to the home services website.
“We haven't built a lot of new housing.”
While home improvement activity is expected to decline further from its pandemic highs, remodelers are still busy with work.
Contributing to Demand: Owners are living in their homes longer, and the current housing stock in the United States is getting older. Experts say both factors will require homeowners to invest in maintaining their properties.
As of 2024, the typical homeowner will live in their home for 11.9 years, according to real estate brokerage website Redfin. This is nearly double the 6.5-year average in 2005.
It's largely driven by baby boomers who are aging in place. Nearly 40% of boomers have lived in their homes for about 20 years, while 16% have stayed in their homes for at least a decade, Redfin found.
“Aging-in-place remodeling” has turned into a large subsector of the remodeling market as baby boomers move into their retirement years, Dietz said. Instead of moving, some retirees plan to stay in their neighborhoods or near family.
“But it means they're investing in their home, whether it's in energy efficiency elements (or) safety elements like lighting and railings,” Dietz said.
However, the real driver of the reconfiguration is an aging housing market. In 2021, the median age of all owned homes was 41 years old, according to the 2021 American Housing Survey conducted by the U.S. Census Bureau. Homes built in the 1980s or earlier make up about 60% of the current inventory, according to an analysis of U.S. Census data by NAHB.
“This really speaks to the fact that we haven't built a lot of new housing over the last decade. The aging housing stock is going to require investment,” Dietz said.
