This story was originally published in Remodeling.
While the home building industry has lagged in the U.S., the home remodeling industry has soared since the end of the Great Recession. According to the Improving America’s Housing 2019 report from the Harvard University Joint Center for Housing Studies (JCHS), the remodeling market has expanded more than 50% since 2010. Spending on improvements and repairs to owner-occupied and rental properties hit $425 billion in 2017, according the report, a 10% increase from just two years prior.
Improvement spending has been boosted by an aging housing inventory. Around 80% of the 137 million homes in the U.S. are at least 20 years old, while 40% are at least 50 years old.
“The aging of the housing stock has been a boon to the remodeling industry, with spending surpassing investment in homebuilding every year for over a decade, and contributing 2.2% to US economic activity in 2017,” said Abbe Will, Associate Project Director in the Remodeling Futures Program.
According to the report, produced biennially by the JCHS Remodeling Futures Program, increasing home prices in many markets and an aging population have contributed to increased spending on home improvement projects. As house prices rise, home equity rises as well, providing owners the incentive and means to undertake more and larger home improvement projects. Additionally, older households have the resources to afford major renovations, particularly as they relate to accessibility modifications. The 55+ cohort accounted for more than half of the spending on home improvements, according the Improving America’s Housing report.
“Over the next decade, the strong preference of older homeowners to age in place and the increasing difficulty of building affordable housing in many markets will continue to hinder the construction of new homes,” said Kermit Baker, Director of the JCHS’s Remodeling Futures Program. “The remodeling industry will therefore retain its critical role in helping the country meet its housing needs.”
While older households contribute heavily to home improvement spending, in recent years the home ownership rate for individuals 35 years old or younger has increased and so has remodeling spending for that cohort. The JCHS reports younger households are more likely to contribute to local home improvement spending the most in the Midwest and South regions, where homes are more affordable than major metros on the east and west coasts.
The JCHS report finds DIY spending has decreased steadily over the past 20 years. In the first Improving America’s Housing report, the share of spending on DIY projects among owners reporting home improvements was 25%. The 2019 report reports that share has decreased to 18%. The aging population partially explains the long-term decline, according to the report, as older individuals are less likely to take on improvement projects than younger homeowners.
The report projects that several factors could contribute to tempered remodeling growth in the short- and long-term future. In the short term, investments on homes previously lost to foreclosure, held off the market, or converted to rental units are likely to slow. In the long term, the decline in homeowner mobility is likely to contribute to a drag in the remodeling market, as households that move typically spend more on home improvements during the first several years of occupancy.
The report found that 7 million rental and vacant units were converted into owner occupancy in 2016 and 2017, with new owners in these units contributing $50 billion in improvement spending. Spending on natural disaster recovery during the same two-year period was $30 billion, according to the JCHS report.
This story was originally published in Remodeling.
