Home Renovation Spending to Exceed $450 Billion
According to a new report from Harvard’s Joint Center for Housing Studies, Improving America’s Housing 2019, home renovation and remodeling increased 6.5% from 2016 to 2017, and more than 50% since the Recession ended. In fact, remodeling spending accounted for 2.2% of total national economic activity in 2017. Homeowners staying in their homes longer combined with aging housing stock and appreciating home values has led to a surge in renovation and remodeling spending, and it’s only expected to keep growing.
A post-Recession slowdown in construction, combined with more homeowners staying in their homes longer has led to a big need for renovation and remodeling. Home Depot Executive Vice President Edward Decker reports, “we under-built for going on 10 years now, so over 50% of the US housing is now over 40 years old.” After years of appreciating home values, tappable home equity has also risen exponentially. In September, HousingWire reported the national total of accessible home equity for 44 million homeowners had surpassed $6 trillion. Homeowners can access home equity through a cash-out refinance or home equity line of credit. Depending on the scope of the renovation project, homeowners can also use renovation financing to combine the cost of the renovation into the total cost of the mortgage.
Homeowners are renovating their homes for a number of reasons. Older homeowners may modify their homes so that they can age in place. This may include widening doorways to allow access for wheelchairs, adding bathrooms on the ground floor, or making other adjustments to improve the home’s accessibility. Homeowners with growing families may need to renovate to create more space for children including adding additional rooms and bathrooms. Homeowners living in an aging home may choose to renovate to add energy efficient appliances and improve the home’s longevity. Additionally, homeowners are also spending more on repairs caused by natural disasters. In 2017, disaster-related repairs cost American homeowners $14 billion, with the average repair costing $17,322.
The Harvard Joint Center’s data is limited to spending on owner-occupied properties. It is more difficult to track what landlords are spending to remodel investment properties. Based on the dataset, remodeling spending is expected to increase 7.5% from 2017 to 2018.
If you are planning a home renovation project this year, and would like to discuss financing options, please let me know.
Sources: HousingWire, MarketWatch