Recent reports indicate a decline in home remodeling projects, but the market is far from stagnant.
Market Trends
The Leading Indicator of Remodeling Activity (LIRA), which tracks home improvement spending, peaked at 17.3% in Q3 2022 but has since decreased, dropping 1.2% in Q1 2024 from the previous quarter. Similarly, the NAHB/Westlake Royal Remodeling Market Index (RMI), which measures remodelers’ market sentiment, fell to 66 points in Q1 2024, down from its peak of 87 points in Q3 2021.
Despite these declines, NAHB’s Chief Economist Robert Dietz notes that the RMI remains in positive territory, indicating that more remodelers view market conditions as good rather than poor. Mike Pressgrove, NAHB Remodelers Chair, highlights that demand for remodeling persists, especially among homeowners who can finance their projects without relying on current high interest rates.
Impact of COVID-19
The pandemic initially spurred a surge in home renovations as homeowners invested in upgrading their living spaces. Many used savings accumulated from stimulus checks and reduced spending on other activities. However, as these savings diminished, the volume of remodeling projects decreased.
Spending Trends
In 2023, homeowners spent an average of $9,542 on home improvements, a 12% increase from the previous year, although the number of projects per household fell from 3.2 to 2.8. This trend suggests that inflation and higher material costs are affecting household budgets.
Future Outlook
While remodeling activity is expected to moderate, remodelers remain busy due to aging housing stock and longer homeownership tenures. The typical homeowner’s tenure has nearly doubled since 2005, largely driven by baby boomers aging in place. This trend has boosted the “aging-in-place remodeling” market, focusing on home improvements for safety and energy efficiency.
The aging housing market is a key driver for continued remodeling activity. In 2021, the median age of homes was 41 years, with 60% built in the 1980s or earlier, necessitating ongoing investments in maintenance and upgrades.
