Americans spent a record $567 billion on home renovations last year as owners shunned relocations amid rising mortgage rates and home prices, according to a study from Harvard’s Joint Center for Housing Studies.
Homes in the US are older today than ever and need critical repairs and maintenance, according to the study. They also need more investment in energy efficiency, disaster prevention and accessibility to prepare for climate change and accommodate an aging population. Also driving renovations is the rise of remote work.
Key Takeaways
- Americans spent a record $567 billion improving their homes in 2022.
- At least 3 million homeowners and 4 million renters live in inadequate homes with inoperable systems, such as heating or plumbing.
- Discretionary projects, such as kitchen remodels, accounted for just over 30% of aggregate home improvement expenditures.
Annual spending on home improvements and repairs rose 16% from 2019 and 2021, an annual pace of growth more than double the historical average of 5%. Home improvement spending is expected to slow throughout 2023, but will still show growth over the year, according to Abbe Will, one of the authors of the report.
“Half of all owner-occupied homes in the US are older than 40 years today,” Will said. “The surge in spending is expected to slow this year given the many headwinds that the market is facing, but we’re still expecting a bit of growth here, about 2.5%.”
Replacement projects such as roofing, siding, windows, doors, electrical, plumbing, and HVAC systems again dominate the market in 2021, accounting for 48% of expenditures. Discretionary projects such as kitchen and bath remodels and room additions are made up just over 30% of aggregate expenditures.
“With the continued aging of our homes replacement projects have become the dominant share of home improvement spending so projects like roofing, HVAC, flooring, windows and doors,” Will said. “They make up nearly half of all homeowner improvement expenditures today, with this increased focus on more need to do projects that typically can’t be deferred, at least not permanently,”
Aging millennials who are renovating first-time homes is also a factor, according to the report.
“Growing activity among owners of color, as well as the sheer number of millennials who have yet to reach those prime ages for first-time home buying and remodeling – that all points to continue to strengthen remodeling rates,” Will said.
According to the report, in 2021, about 3 million homeowners and 4 million renters were living in inadequate homes with structural deficiencies or inoperable systems, such as heating, plumbing or electrical systems.
Many of the homes that need critical repairs are occupied by households that are least likely to be able to afford the expense, according to the report.
“Deteriorating housing systems and equipment threatens the health and safety of older, lower-income homeowners, while the burden of high improvement and repair costs jeopardizes the current stock of affordable housing,” the report reads. “Disparities in home equity by race and ethnicity suggest widening gaps in housing adequacy, accessibility for aging in place, home energy performance, disaster recovery, and improvement and maintenance cost burdens.”