Millennials, baby boomers to drive remodeling growth
Baby boomers and millennials will be driving forces behind solid growth in the remodeling market that is projected through 2025, according to a new report from the Harvard Joint Center for Housing Studies.
The residential remodeling market peaked at $340 billion in 2015, and spending is expected to grow 2% annually through 2025. However, general growth in homeownership in the coming years is likely to be weighted toward groups that are known to spend less, relatively, on home upgrades: minority owners, older owners and households without children.
Boomers are expected to remodel their homes for accessibility. The share of spending by the 55-plus segment is forecast to grow from 31% of total remodeling dollars in 2005 to 56% by 2025. Millennials, who are likely to purchase existing homes requiring renovations, will focus on factors like energy-efficiency, material health and home automation, affording remodelers an opportunity to explore such niches.
As home prices continue to climb, existing owners are reinvesting in their properties with upgrades that capitalize on that potential for return. Meanwhile, as the JCHS notes, younger buyers are putting pressure on the tight existing-home market, which contains many older properties in need of an upgrade.
In its annual Cost vs. Value Report, which looks at the resale payback of 29 home remodeling projects, Remodeling noted that such upgrades returned, on average, 64.3 cents on the dollar in 2017, roughly on par with a year ago and held back by factors including higher supply-side costs. Returns on projects such as a major or minor kitchen remodel, basement remodel, family room addition and universal design bathroom all came in above the annual average this year.
Remodelers are optimistic. The National Association of Home Builders’ Remodeling Market Index posted a score of 53 in the fourth quarter of 2016, ahead of the breakeven point of 50, albeit dropping four points from the prior quarter. The index’s current and future conditions sub-indices also fell during the period, a factor that could be contributed to the industry's uncertainty before and guarded optimism after the U.S. general election.
The owners of existing homes and new buyers alike have an eye out for key upgrades in 2017, among them smart technology, built-in bars, free-standing tubs and marble countertops, according to an analysis by real-estate listing website Redfin of the terms describing such features among its listings in recent years. On the way out are breakfast nooks, bamboo flooring and minimalist design.
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- Harvard Joint Center for Housing Studies Aging Homeowners Drive Growth in Remodeling as Millennials Begin to Gain Footing