The forces behind a multi-year surge in home remodeling are waning. The homebound days of the pandemic that drove home updates are fading and the homebuying frenzy has stalled. In their place, concerns for high inflation and a looming threat of recession are easing in.
What does that mean for remodeling?
Despite the changing market, homeowners will keep it coming. “The nation’s housing stock is aging, and older homes are more in need of repairs, maintenance, and updates. And despite the turmoil in the economy and financial markets, homeowners have high levels of equity they can tap to fund the work,” writes Realtor.com.
Though slowing from the high growth rates of recent years, remodeling dreams and necessities will continue. Homeowners will be motivated to fix up older homes, prepare homes for sale, ready homes newly purchased to meet their needs, make energy-efficient retrofits spurred by new government incentives and carry on when unexpected repairs need attention.
Homeowners are projected to spend $448 billion nationally in the first quarter of 2023, according to analysis by Harvard University’s Remodeling Futures Program at the Joint Center for Housing Studies. That’s about a 34.1% increase from the $334 billion homeowners spent in the first quarter of 2020, according to data from the center’s Leading Indicator of Remodeling Activity, or LIRA.
“These things will continue to prop the remodeling market up,” says Paul Emrath, vice president of survey and housing policy research at the National Association of Home Builders. “People have savings and equity in their homes … so they’re not as dependent on loans.”
“A lot of remodeling does tend to happen around the sale of a home,” says Abbe Will, senior research associate and associate project director of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. He explained that sellers fix and ready their residences to prepare them to go up for sale and “recent buyers tend to spend quite a lot more in the first few years after buying a home.”
Nationally speaking, home sales have declined from the hyper highs of recent years and interest rates have risen along with the remodeling costs of labor and materials. Experts predict these factors will slow the remodeling frenzy, but practical remodeling will keep its foothold.
“Although remodeling market gains are expected to cool significantly next year, homeowners still have record levels of home equity to support financing of renovations,” says Will. “Energy-efficiency retrofits incentivized by the Inflation Reduction Act of 2022, as well as disaster repairs and mitigation projects … will further support expansion of the home remodeling market to almost $450 billion in 2023.”
“We are expecting the market to continue to grow, just not nearly as fast as it was the past couple of years,” says Will.
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By Tom Kalinski. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in commercial and residential real estate. For questions, email Tom at [email protected], call 303.441.5620, or visit boulderco.com.