The end of the remodeling boom?
By Melissa Dittmann Tracey
A slowdown in renovation projects is settling in after a pandemic-fueled boom, but there are plenty of reasons why the pullback may not last long.
During the pandemic, Americans became ultra-focused on upgrading their homes, taking on remodeling and DIY projects in record numbers. But as recession fears mount, more homeowners are putting on the brakes and showing less willingness to dole out large amounts of money on home improvement projects.
Home improvement experts say consumers are becoming increasingly jittery about the economy and are moving from large-scale remodels to smaller, cheaper projects – or scrapping their renovation plans altogether. Consumers have a case of the “home improvement blues,” Neil Saunders, a retail expert and managing director at Global Data, reportedly said this week.
Despite several possible reasons for the remodeling slowdown, it won’t be a bust. One reason is that homeowners often remodel in preparation for and/or after moving. As home sales appear slow this spring, there may be fewer new homeowners to make these remodeling changes; at least for now, said Jessica Lautz, deputy chief economist and vice president of research at the National Association of REALTORS®.
Elevated materials prices also may be causing homeowners to back away from remodeling, as the median price for a home improvement project surged to $22,000 in 2022, a record high and a 22% jump from 2021, according to the 2023 U.S. Houzz & Home Study.
Labor shortages are continuing to drive up renovation costs and timelines, according to the second-quarter reading of the responses from about 1,500 home improvement firms. Ninety percent of survey respondents reported ongoing delays for cabinetry, indoor furniture, windows, and lighting fixtures.
As we come out of the pandemic, people have more activities to engage in outside the home, removing some of the urgency to remodel that owners felt when they were stuck at home. The pandemic-fueled remodeling boom “seems to be settling as people have more time and the ability to travel and go to dinner versus picking up a paint brush or hammer and reinventing their home,” Lautz said.
She views the remodeling slowdown as short-lived because homeowners who locked in lower mortgage rates in recent years are likely to stay put rather than trade up at a higher rate. “As these homeowners stay put, they may need to invest in improvements or want to reimagine their space to fit their changing needs,” Lautz adds.
Why remodeling should remain strong long-term
A Houzz survey earlier this year found that more than half of homeowners say they intend to renovate in 2023. The U.S. debt ceiling crisis and a fragile economy may have an impact on renovation activity, but there are some factors that may keep the remodeling sector strong in the long run.
· Low inventory. Faced with few housing options on the market, many homeowners may feel stuck and wary of today’s higher mortgage rates and home prices. As they stay in place, they may desire to upgrade their current home to accommodate their lifestyle and needs for longer than they intended.
· Aging homes. The median age of a home in the U.S. is 39 years old. As homes age, they often need repairs or updates to maintain their value. Nearly 30% of homeowners updated their plumbing, followed by electrical and home automation upgrades, according to a recent Houzz survey. Homes enter their prime remodeling years when they are between 20 to 29 years old, and an additional 2.9 million homes will be entering that age range by 2027, according to data from the National Kitchen & Bath Association.
· Boost value. Sixty-two percent of homeowners say their main motivation for taking on a recent renovation was to increase their home’s value, according to a survey conducted by Cinch Home Services, a home warranty company. Homeowner’s express concerns about selling their home in its current state, citing concerns their home is in need of too many repairs (65%); has an outdated interior (60%); lacks trendy fixtures (38%); or lacks curb appeal (33%), the survey notes.
Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine
Bottom line, people are wedded to their low mortgage interest rates and intimidated by current high prices with incumbent higher property taxes; so, unless they would be moving out of state, a remodel, even with a tax reassessment, can make sense for people who want more out of their home living conditions.
Just some food for thought because these are some additional facets of “all things real estate.”