Home improvement is surging. The leaders in the home improvement industry site 2016 as the best year since the 2007 financial crisis and 2017 is on track to exceed the previous year’s level.
What’s behind the growth, there are three essential elements that are propelling the industry forward.
Growth Driver #1: The Age of Existing Homes 2015 government data showed that the median age of homes in the U.S. was 1976, i.e. 39 years old. Today 52% of homes were built before 1981 and only 19% were built after 2000. Older homes need more maintenance than newer homes. Investments in older homes range from basic placements and repair to updating home systems, such as electrical wiring or panels, to upgrading exterior building features, such as weathered roofing or siding. Additionally, older homes tend to be smaller which prompts owners to add more square footage and reconfigure floorplans. Lastly, homeowners are likely to upgrade the outdated style, features, and/or appliances in older homes by remodeling kitchens and bathrooms (e.g., a median kitchen and bathroom is updated every 25 and 23 years, respectively) and other living spaces.
Growth Driver #2: Older Homeowners, More Income According to the U.S. Census in 2016, 37% of homeowners were in the 35-54 age range and 44% in the 55+ age range. This is an important factor for the home renovation industry as older and more established households are the biggest spenders on home improvement. For example, according to the 2016 Houzz and Home study, homeowners in the 35-54 and 55+ age groups spent, an average, $52,100 and $73,300 on 2015 home renovations, respectively, compared to only $24,500 by those under 35. Older homeowners have a greater propensity to spend on home improvements, as they earn greater income and/or have greater savings than younger households. They are also more likely to remain in their current home for more than a decade.
Growth Driver #3: Strong Consumer Confidence Consumer confidence is a major indicator of how likely consumers are to spend on home improvement. 2016 consumer confidence closed at the highest levels in 15 years, with the Conference Board index reporting 113.3. Consumer confidence is rooted in home prices and job market conditions, among other factors. It helps that home prices have fully recovered relative to the prerecession peak on a national level, propping up home equities. Furthermore, the unemployment rate has returned to the pre-recession low levels of 4.6-4.7% and the economy has been gaining jobs for the past seven years in a row.
All in all, the combination of professional and consumer optimism and aging homes and population will be key to continued industry.
Terry Roberts, Broker/Owner