Home sweet home improvement: Americans are nesting in place

___

Published Date 10/21/2024

While we aren’t caught up in the remodeling frenzy that took place during the pandemic (when interest rates for home equity loans were at rock bottom) Americans are still renovating up a storm.

According to Realtor’s Julie Gerstein, spending on home improvements and maintenance is expected to grow from its current $472 billion to $477 billion by the third quarter, a modest increase of 1.2%, according to the latest Leading Indicator of Remodeling Activity report (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. Gerstein says LIRA points out how various indicators, including building materials sales and the number of remodeling permits issued are backing up this forecast. “The 1.2% increase is a sign that the market might be leveling off and correcting from the pandemic when homeowners were spending more time and money on home projects. Plus, low interest rates at the time motivated sellers to make their homes as up-to-date as possible for the market.”

That led to what Remodeling Futures’ Abbe Will called the pandemic remodeling phenomenon “the big boom,” where the renovation market increased by 10% to 15% — “… people catching up on work that they already wanted to do,” Will explains. “It was also probably people doing work that they hadn’t quite planned to do, but it was just a convenient time, a better time. I think this is a little bit of a resetting to more normal rates, although we’re not there yet,” she says. “Even though growth in the market hasn’t been the raging 10% year over year or 15% year-over-year growth that we saw during the first couple of years of the pandemic, we’re still expecting a lot of spending.”

Despite the market slowdown over the past couple of years, however, Will says there’s “still a phenomenal amount of spending—way more spending than what we saw in 2019, before the pandemic.”

Renovation spending is expected to grow into next year due to several factors. As new home construction and existing home sales continue to improve, this is likely to drive an increase in residential improvements and repairs. Carlos Martín, director of the Remodeling Futures Program at the Joint Center for Housing Studies, notes that rising home values and equity levels should encourage both discretionary projects and necessary replacements for homeowners who choose to stay put.

A recent survey by Clever Real Estate sheds light on homeowners' attitudes towards renovations. Of the 1,000 American homeowners surveyed, 63% expressed a preference for remodeling their current homes rather than moving into an already renovated property. The motivations for renovating varied, with equal percentages (35%) citing the need to repair damage and the desire for increased comfort. Other common reasons included improving livability, enhancing aesthetic appeal, personalizing the home, and increasing property value.

However, the renovation process isn't without challenges. Many homeowners reported significant delays in their projects, and a substantial 78% admitted to exceeding their renovation budgets.

The survey also revealed the most popular renovation projects. Major renovations included bathroom remodels, interior painting, and heating and air-conditioning upgrades. Minor renovations frequently involved installing new faucets and light fixtures, as well as making small updates to kitchens.

This trend in renovation spending reflects a broader shift in homeowner priorities, as many choose to invest in their current properties rather than seeking new homes in a challenging real estate market.

Realtor, TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

Superior Funding Corporation is a Massachusetts Mortgage Company. Massachusetts Mortgage Lender and Broker License: MC2972, NMLS ID: 2972.