The No. 1 Reason Homeowners Are Dropping a Bundle on Renovations Right Now
Published on Realtor.com Wednesday, Mar 27, 2024
Homeowners are spending more on remodeling their properties, thanks to the challenging housing market.
With low inventory compared with pre-pandemic times, rising home prices, and high mortgage rates, homeowners spent 60% more on renovations from 2020 to 2023, according to a recent report from Houzz, a home remodeling and design platform.
And in the past year alone, they spent a median of $24,000 sprucing up their homes.
“Homeowners are reluctant to move and take on a new mortgage at a higher rate, so they invest in renovations for their current homes,” says Houzz staff economist Marine Sargsyan. “Shortages in housing stock may also make it challenging and often expensive to find the perfect home.”
Photo by KraftMaster Renovations
Many homeowners locked in low mortgage rates during the pandemic and have been reluctant or unable to afford to give up those rates to trade up or down into a new home at a higher. (Mortgage rates averaged 6.87% in the week ending March 21, according to Freddie Mac.) So they’re outfitting their homes for the future.
About 62% of homeowners planning renovations expect to spend an additional 11 years staying put, according to Houzz.
Higher renovation costs are also to blame as the cost of materials and labor have steeply increased over the past few years.
“We’re doing bigger remodels,” says remodeler and custom homebuilder Mike Theunissen, one of the owners of Howling Hammer Builders in Mount Pleasant, MI. “People are choosing to stay where they are and spending more money because it’s gotten so expensive to build new homes.”
Home improvement projects remained popular despite the higher price tags, but fewer folks are planning new projects. About 52% of homeowners expect to embark on a project this year. That’s down from 56% in 2023 and 58% in 2022.
The 2024 Houzz & Home Study is based on a survey of more than 30,000 folks in January and February of this year.
The most popular remodeling jobs
The most popular remodeling job remained a kitchen overhaul. The kitchen was the most common interior room renovation, at 29%.
Kitchens were closely followed by guest bathrooms, at 27%, and primary bathrooms, at 25%. About 21% of homeowners had their living rooms redone.
“Kitchens and bathrooms have historically been the most frequently upgraded areas in the home. They serve essential functions of daily life, so they’re often the most frequently trafficked spaces leading to accelerated wear and tear compared with other areas,” says Sargsyan. “They’re also a target for homeowner design preferences as people look to create their own personalized sanctuaries or desirable focal points for potential homebuyers.”
More than half of homeowners also did outdoor projects. The most popular was updating outdoor lighting, 22%, followed by installing security systems, 18%.
These renovations weren’t cheap either. Homeowners spent about 20% more on their kitchen remodel, which came in at a median of $24,000 in 2023. They dropped about 11% more on bathrooms, spending a median of $15,000.
Almost 2 in 5 homeowners went over their remodeling budgets last year due to unexpected costs and problems and because they wanted more expensive materials and products, according to Houzz.
Three or four years ago, one of Theunissen’s bathroom remodels would have cost about $12,000. Now, the price tag is about double due to higher materials and labor costs, he says.
“For both kitchen and primary bathroom projects specifically, the leading motivation is that the homeowners can no longer stand the style of the old space,” says Sargsyan. “That said, more than a third of homeowners cited deterioration as the impetus for kitchen and bathroom improvements.”
Who’s spending the most on remodeling their homes?
For the second year in a row, members of Generation X dropped the most money on fixing up their abodes. They spent a median of $25,000 on their remodels in 2023.
Baby boomers spent just slightly less, at a median of $24,000, while millennials laid out about $20,000.
“Older generations, who may be retired, state that they’ve wanted to do renovations all along and finally have the time,” says Sargsyan. “Meanwhile, Gen Xers claim that they finally have the financial means to afford renovations. And millennials, who are increasingly able to purchase their own homes, want to customize them.”
Boomers embarked on the most renovation projects, making up 56% of all activity. They were followed by Generation X, at 32%, and millennials, at 9%.
“More people are remodeling because it’s too expensive to build a new home or even buy an existing home,” says Dan Bawden, president of the remodeling company Legal Contractors in Houston. “Interest rates play a big factor in that calculus.”
