Home improvement continues to flourish, but while baby boomers remain the biggest spenders, the millennial generation has seemingly taken the lead in completing the most home improvement projects.
That’s among the key findings of a recent online survey conducted among more than 1,000 homeowners by HomeAdvisor, the Golden, CO-based digital marketplace that connects homeowners with service professionals. HomeAdvisor’s “True Cost Report,” authored by chief economist Brad Hunter, provides insight into homeowner spending trends and the primary factors influencing project decision-making.
According to the report, homeowners are choosing remodeling over selling and moving, with more than 80% of surveyed homeowners saying they plan on remaining in their existing homes and half considering a remodel. Aside from an overriding reluctance to move, the doubling of homeowner equity over the past six years has also given people the financial wherewithal, and the confidence, to make discretionary upgrades in their homes, HomeAdvisor found. Nearly two-thirds of surveyed homeowners plan to spend as much money, or more, on home improvements in the coming 12 months compared to the past 12 months, the report revealed.
“More homeowners are choosing to remain in and improve their existing homes rather than sell and move into new homes,” Hunter said. “And, depending on the age and condition of their home, as well as their own age and economic situation, they’re making modifications both out of necessity and a desire for aesthetic and lifestyle improvements.”
According to Hunter, homeowners in their 60s are adding touches of luxury and convenience, while those in their 30s are using their savings and equity to make their homes more efficient, while improving the aesthetics and infrastructure.
The HomeAdvisor report also reveals that millennials, for whom homeownership rates are increasing rapidly, are more likely than any other generation to remodel any part of their home – and take on the highest number of projects. Five in six surveyed millennials (born 1980-1994) plan to spend as much or more on home improvements in the coming 12 months as they did last year, with more than half expecting to spend more, HomeAdvisor said.
Source: HomeAdvisor 2018 ‘True Cost Report’[/caption]
“Most millennials have had to compromise on the size and condition of their starter homes, with many purchasing older homes in need of repair just to be able to afford homeownership,” Hunter commented. “Many millennials who bought a home in the last few years are seeking to upgrade. But a lack of housing inventory coupled with inflated home prices and rising mortgage rates has them renovating their existing homes instead of selling and moving.”
According to Hunter, the popularity of repair-and-maintenance projects, peppered among larger-scale upgrades such as bathroom remodels, exterior painting, landscape installations and kitchen remodels, “is indicative of the millennial influence and the trend toward continued home improvement growth.” Looking to the future, Hunter said, “millennials will see a significant increase in their share of home improvement spending.”
But while millennials have a higher propensity to tackle home improvements, they don’t spend as much as baby boomers to complete them, according to HomeAdvisor. In fact, baby boomers – who’ve generally accumulated greater equity and have higher net worth – have outspent millennials by 32% over the last 12 months on home projects. Furthermore, baby boomers plan to spend 77% more on kitchen remodeling projects in the next 12 months than millennials, the HomeAdvisor report found. Luxury and discretionary home upgrades account for a larger share of total home improvement expenditure than they did 10 years ago, Hunter pointed out.
Among the additional findings from the HomeAdvisor report are the following:
Bathroom remodels will continue to be more popular than kitchen remodels. In fact, almost one-quarter of homeowners say they’re planning for a bathroom remodel in the next 12 months, compared to 15% of homeowners planning for a kitchen remodel. ”Adding or upgrading creative lighting, flooring, cabinets, shower doors/enclosures and tile are popular tasks,” Hunter said. “Many homeowners also include luxury touches like multiple shower heads and built-in audio speakers for extra entertainment and enhanced relaxation,” he added.
Much of the strength in home improvement can be attributed to an unusually low supply of housing for sale, which is driving up home prices and frustrating would-be homebuyers, particularly at the under-$200,000 price point, HomeAdvisor’s report concluded. “The number of homes for sale in markets across the country was already low a year ago, and the supply has fallen further short in 2018,” Hunter said. “The upshot is that many people who would ordinarily want to move to a different home are making the decision to stay put and improve or repair the home they already have.”
While recent growth in home improvement spending has resulted from increased home values, increased homeowner equity and increased consumer confidence in a recovering economy, “going forward, we’ll likely see home values and equity continue to fuel home improvement growth, but in a different way, particularly as older homeowners complete more accessibility improvements and millennial influence continues to grow in the home improvement sector,” HomeAdvisor said.
Recent tax changes and rising interest rates are not significantly impacting homeowners’ decisions regarding home improvements and home sales and purchases, according to HomeAdvisor. In fact, more than two-thirds of surveyed homeowners say these changes make them neither more nor less likely to complete a major home improvement project or sell and purchase a primary residence in the next 12 months.
“Looking into the future, we anticipate rising mortgage rates to have a greater impact on homeowners’ decisions regarding home sales and purchases. We expect that, unless they have to move for reasons related to job relocation or family, more people will consider staying where they are to keep their current, locked-low mortgage rate and avoid borrowing at a higher rate to make a new purchase,” Hunter said.
“Faced with higher monthly mortgage payments, homeowners will become increasingly hesitant to sell their current primary residence to purchase a new home. That means they’ll continue to improve instead of move. And that will facilitate continued growth in home improvement,” he added. ▪
A version of this article first appeared in our sister publication Qualified Remodeler.