Don’t be misguided by what you see on HGTV. The renovation market is not being driven by young couples out to feather their first nests. According to a report released by Harvard Joint Center for Housing Studies, Baby Boomers, motivated by changing accessibility needs, currently spend more money than any other generation on housing renovations – and will continue to do so over the next several years.
‘The Renovation Market is Back’
In general, the residential renovation market is going strong. In 2015, spending on repairs and improvements reached an all-time high of $340 billion, seven percent above the earlier 2007 peak. The Demographic Change and the Remodeling Outlook predicts that more than half of that spending will come from Baby Boomers looking to “age in place” with safety and accessibility upgrades.
Expenditures by homeowners age 55 and over are expected to grow by nearly 33 percent by 2025, accounting for more than three-quarters of total gains over the decade. The share of market spending by homeowners age 55 and over is projected to reach 56 percent by 2025, up from only 31 percent in 2005.
‘Prime Remodeling Years’
Described as being in “prime remodeling years,” Gen-Xers also contribute significantly to the health of the renovation market. Compared to previous generations, Millennials enter into homeownership at slower rates. As they do, however, housing affordability issues drive them to purchase older properties in need of rehabilitation, increasing renovation spending in the 35 and under demographic.
In a statement, Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies explained, “With national house prices rising sufficiently to help owners rebuild home equity lost during the downturn, and with both household incomes and existing home sales on the rise, we expect to see continued growth in the home improvement market.”
Housing Affordability Strikes Again
Rising home prices, though, are a double-edged sword. Housing affordability continues to cause concern for younger buyers. For those that are able to afford homes, the entry price may make future home renovation and repair impossible. Challenges to renovation market growth also come with growing home owner groups that historically spend less on home repairs. These groups include the elderly, households with children, and minorities.
“Despite these challenges, the remodeling industry should see numerous growth opportunities over the next decade,” says Chris Herbert, managing director of the Joint Center for Housing Studies. “Strong demand for rental housing has opened up that segment to a new wave of capital investment, and the shortage of affordable housing in much of the country makes the stock of older homes an attractive option for buyers willing to in invest in upgrades.”
Beyond accessibility, those specialty upgrade areas poised to see growth include efficiency, sustainability and home automation – particularly for younger, tech-savvy, environmentally-aware home buyers.