Annual home improvement spending in the United States has been increasing for over a decade now, and this growth is set to continue for most of 2023. However, the Leading Indicator of Remodeling Activity by the Joint Center for Housing Studies of Harvard University has recently projected a drop in spending at the start of 2024.
With 49% of owner-occupied homes built before 1980, an aging housing stock has been boosting annual spending on improvements and repairs year over year. But the current financial instability of certain markets and threats of a recession still looming may be causing homeowners to become warier of their spending habits toward home improvements than in previous years.
To better understand the patterns of the home remodeling market, we take a look at both historical and geographical data on home improvement spending, the projects homeowners are spending their money on, and which projects they’re deciding to hire professionals for.
Home Improvement Spending by Year
After analyzing historical data from the JCHS, we calculated that homeowner improvements and repairs spending increased by 78% between 2014 and 2022. However, it’s worth mentioning that this data is not seasonally adjusted, so inflation should be taken into account when considering this increase. The statistics displayed for 2023 and Q1 of 2024 are LIRA predictions based on the various factors that could influence the characteristics of home improvement and repair activity in the U.S. over the coming months.
What’s noteworthy about the JCHS’s data is that the year-to-year increase accelerated in the two years since the start of the pandemic. In fact, the annual growth pace was more than double the historical average between 2019 and 2021. The home remodeling industry was one of the few industries positively impacted by the pandemic. With people spending more time at home and the need for home offices skyrocketing, remodeling activity boomed throughout the country.
A major factor of the home improvement and repairs spending growth over the past few years is the increasing price of materials and labor costs. Since the demand for improvements and repairs has remained steady in part due to an aging housing stock, homeowners have been forced to spend more on their projects, driving up annual spending across the home remodeling market.
Another reason for the recent growth of the home remodeling industry could be the current state of the housing market. The number of households unable to afford a median-priced home increased by 195% over the last five years, so homeowners may be opting to invest in improving their current homes and abandoning plans they may have had of buying a new one.
Projects Homeowners Are Spending the Most Money On
The above graphic represents the latest data on U.S. expenditures from the American Housing Survey by the U.S. Census Bureau. We can see that interior and exterior additions and replacements make up a large portion of home improvement spending, with HVAC and roofing seeing some of the highest expenditures in the market at $56.6B and $72B, respectively.
Comparing the expenditures of these projects highlights the improvements and repairs homeowners consistently spend the most money on.
Roofing
Expenditure: $72B
Roofing is the top project homeowners spend the most money on. Roof repairs and replacements are essential to the integrity of the home. With the average cost to install a new roof ranging between $9,500 and $20,000, this project significantly drives up homeowner spending on improvements and repairs.
Kitchen Remodeling
Expenditure: $58B
As one of the most frequently used spaces in the home, kitchen renovations see one of the highest expenditures in the home remodeling industry. A recent study on kitchen trends found that homeowners are willing to spend more on a kitchen remodel in 2023 than before. The average cost to remodel a kitchen is between $15,000 and $50,000, so this project is likely to continue to rank high in terms of home improvement spending.
HVAC
Expenditure: $56.6B
An HVAC electrification conversion is said to be the home improvement project with the highest ROI in 2023. As homeowners become more aware of the impact of natural gas on the environment and their health, HVAC conversions may grow in popularity. The cost of HVAC can vary depending on the project. However, it tends to be a relatively big investment compared to other projects.
Bathroom Remodeling
Expenditure: $51B
According to a recent report on bathroom trends, 71% of homeowners are also willing to spend more on bathroom remodeling in 2023. A bathroom remodel is another home improvement that consistently tops the list of the projects on which homeowners spend the most, with the cost to remodel a bathroom averaging between $4,500-$9,000.
Home Improvement Spending by Region
The above map represents data from the U.S. Census Bureau on the expenditures of home improvement and repair projects carried out throughout the U.S. between 2019 and 2021. By highlighting the Census divisions and regions, we can see that the highest expenditures are located in the South Atlantic and Pacific regions, with homeowner spending reaching $119.6B and $100.5B, respectively.
The highest number of home improvement projects carried out during this time period was over 21.7 million in the East North Central Division, over 18.7 million in the Pacific Division, 16 million in the West South Central Division, and over 15.8 million in the Middle Atlantic Division.
Professional vs. DIY Home Improvement Project Spending
The above graphic represents the American Housing Survey data on homeowner spending for various home improvement projects, highlighting the distribution of spending between homeowners opting to complete the project DIY and those who choose to hire a professional.
The projects homeowners spend the most money on by taking the DIY route are kitchen and bathroom remodels, with homeowners spending an average of $17.5 billion and $11.9 billion every two years, respectively. The projects homeowners spend the most money on by hiring a professional are roofing at $64.9 billion and HVAC at $50.9 billion.
Although the majority of homeowner spending goes into hiring professionals for their home improvement projects, inflation may have caused them to take on more of these projects themselves this year. This could potentially be a contributing factor to the slight decline in spending predicted by the JCHS.
Bottom Line
Given the current state of home affordability, homeowners are focusing on improving what they already have and investing in remodels that will increase the functionality and value of their existing homes. An aging U.S. housing stock is also pushing those who can’t afford a new home to make expensive repairs on their current property, further contributing to the growth of home improvement and repair expenditures.
Although current material prices and increasing labor costs may cause a slight decline in the home remodeling market at the end of this year due to homeowners holding back on their home improvement and repairs spending, federal tax incentives of up to 30% for energy-efficient retrofits such as efficient HVAC and insulation may prevent remodeling expenditures from experiencing steep declines in the near future.
Author
Irena is an industry analyst at Fixr.com. She analyzes and looks for visual ways to simplify data. She has been researching and writing about home improvement and personal finance since 2018. At Fixr.com, she is constantly looking to give homeowners the best advice on how to invest in their homes.