Home remodeling demand may surpass pre-recession spending this year

Despite a lag in home building numbers, the home remodeling demand remains strong, and there is potential it will hit record levels this year, according to a new report from the Joint Center for Housing Studies of Harvard University.

While home building has yet to recover from the recession, and is still down 60 percent of its pre-recession numbers, home remodeling didn’t suffer as much during the recession. From pre-recession through current years, home improvement and repair had fallen at most 13 percent from “peak to trough,” according to the report. Thus, home improvements didn’t have nearly the deficit to overcome as home building does.

The report suggested that people are unable to afford to build new houses, so they instead focus on updating and remodeling their current properties. Home improvements in the study included owner improvements, owner maintenance, rental improvements and rental maintenance.

The report suggests that home improvements will surpass its 2007 high of $324 billion this year. In 2013, home improvements had bounced back to $298 billion, after hitting a low of $281 billion in 2011.

Of note, homeowner maintenance and repair expenditures totaled $52 billion in 2013, up from 14 percent in 2007 to nearly 18 percent six years later in 2013. Additionally, investment in the improving of rental properties also improved, increasing from more than 16 percent of spending in 2007 to about 18 percent in 2013.

“At this level of spending, the home improvement market appears to be returning to its long-term trend. On an inflation-adjusted basis, outlays per owner averaged $2,500 in 2013, well below the peak of $3,400 in 2007 but more than 8 percent above the $2,300 annual average posted between 1995 and 2005,” the report stated.

Additionally, as both the economy and the housing market continue to bounce back, discretionary project spending, such as larger home remodels and additions that improve homeowner lifestyles but aren’t a necessary expense,  has also increased.

So, who is spending money on home improvements? In 2013, it was the baby boomers (those born between 1945–64). These owners spent nearly 30 percent more on average on home improvement projects.

The survey predicts that once millennials (those born between 1985-2004) begin to catch up in the housing market, home improving spending will rise. This generation has been slow to buy, but once they do, the home improvement market will see a boost.

If you’re wondering where most of the home improvement spending has been it’s in the metropolitan areas, which accounts for 81 percent overall of improvement spending, or 50 percent more than their non-metropolitation fellow homeowners.

However, the biggest growth has occurred in suborn neighborhoods, which rose 11 percent between 2011 and 2013.

While the home improvement industry has nearly recovered from the industry, chances are, thanks to the baby boomers and millennials, the market will surpass previous goals.

Have you seen an increase in home improvement projects amongst clients?