Home renovation spending expected to decline

Homeowners are expected to continue spending less on remodeling activities through the next 12 months, but by the second quarter of 2025, the total dollars spent on it is likely to rise above levels projected for the next two quarters. 

For the 12-month period ended June 30, Americans spent $468 billion on home improvements and maintenance, down 3% from the total at the end of the second quarter of 2023, according to the Leading Indicator of Remodeling Activity report from the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.

Going forward, researchers believe the remodeling outlay will total $466 billion through June 30, 2025, which is a decrease of 0.5%.

But the year-over-year change for the current quarter is expected to be 3%, followed by projected declines of 6.3% and 2.8% in the succeeding periods. The fourth quarter of 2023 was the last time remodeling spending increased on an annual basis.

"Economic uncertainty and continued weakness in home sales and the sale of building materials are keeping a lid on residential remodeling, although many drivers of spending are starting to firm up again," Carlos Martín, director of the Remodeling Futures Program at the Center, said in a press release. "After several years of frenzied activity during the pandemic, owners are now making upgrades and repairs to their homes at a steadier and more sustainable pace."

Martin noted in the second quarter 2023 release that continued reduction in families preparing to move would result in a similar decline in fix-up activity associated with such actions.

In its fourth quarter results, home improvement product retailer Lowe's said comparable sales were expected to fall between 2% and 3% throughout 2024, in part because consumers are putting off projects because of high interest rates.

Repair is considered one of the hidden costs of homeownership. The average annual cost for a homeowner to perform maintenance on their single-family property has grown 26% over the past four years, a June Bankrate study found. A related study released in May found that 24% of home purchasers said they put aside money to pay for home repairs and maintenance, 19% have needed to take out additional debt for these costs.

Earlier this month, the Federal Housing Administration put out a mortgagee letter detailing long-awaited revisions to its 203(k) program, which finances home repair activity, in an effort to increase the volume of these loans.

Annual spending through the next four quarters should be on par with that of the prior four periods, Abbe Will, associate director of the Remodeling Futures Program added.

"The home remodeling slowdown should continue to be relatively mild, with activity stabilizing just shy of last year's peaks," Will continued.