Recent reports have indicated a decline in the number of homeowners taking on remodeling projects. Some key indicators, such as the Leading Indicator of Remodeling Activity (LIRA) and the NAHB/Westlake Royal Remodeling Market Index, have shown a decrease in spending on home improvement and repair projects. The LIRA, which peaked at 17.3% in the third quarter of 2022, has been steadily decreasing since then. Similarly, the RMI, measuring remodelers’ sentiment about the market, fell to 66 points in the first quarter of 2024 from 87 points in the third quarter of 2021. Despite these declines, the remodeling market is still considered relatively strong, with more remodelers viewing conditions as “good” rather than “poor,” according to experts.
The Covid-19 pandemic brought about a surge in home renovation activity as homeowners sought to improve the spaces they were spending more time in. Projects such as kitchen and bathroom updates, home office constructions, and pool installations were popular choices during this time. Many homeowners utilized their savings, including funds from stimulus checks and money saved during lockdowns, to invest in home improvements. However, as Covid-era savings have diminished, the level of remodeling activity has decreased. Homeowners are now undertaking fewer and smaller remodel projects, though spending more per project due to inflation, rising material costs, and higher construction labor expenses.
Recent data shows an increase in average spending on home improvements, with homeowners shelling out an average of $9,542 per project in 2023, a 12% jump from the previous year. However, the number of projects undertaken per household has decreased, from an average of 3.2 projects in 2022 to 2.8 in 2023. This shift towards higher spending per project indicates the impact of inflation on household budgets. The expectation is that home improvement activity will continue to moderate from the pandemic-induced highs, but remodelers continue to be active due to sustained demand. Factors such as homeowners staying in their properties for longer periods and an aging housing stock contribute to the need for ongoing property maintenance and upgrades.
One growing subsector in the remodeling market is “aging-in-place remodeling,” driven by baby boomers entering retirement years and choosing to remain in their current homes. Instead of moving, many retirees are investing in energy efficiency and safety features within their homes. The aging housing market is another significant factor influencing the demand for remodeling services. The median age of all owned homes in 2021 was 41 years, with homes built in the 1980s or earlier constituting about 60% of the existing housing stock. The lack of new housing construction over the last decade underscores the need for ongoing investment in the aging housing stock to maintain and improve property conditions.
While the home remodeling industry is facing challenges such as declining activity levels and rising costs, there are still opportunities for growth and innovation. Remodelers need to adapt to changing consumer preferences, economic conditions, and market demands to thrive in the evolving landscape of home improvement. By staying informed about industry trends, adopting sustainable practices, and providing high-quality service, remodeling professionals can navigate the current challenges and position themselves for success in the future.