The amount of money that homeowners are spending on home improvement has a tremendous impact on the construction industry. Some states are clearly spending significantly more than others, giving opportunity for growth in the construction industry in these states. Hundreds of billions of dollars are spent each year on improving owner-occupied housing, having a direct impact on the construction market. To help you understand the construction market across various states, we have created the following graphic to give you a visual breakdown.
This graphic has been created using data pulled from the National Association of Home Builders (NAHB). Their report provided forecasted spending on improvements to owner-occupied housing in 2019. These forecasted numbers take into account the number of homes in each state, the percentage of homes built in the 1960s, the percentage of homes built in the 1970s, as well as the average education level and income level of homeowners in the state. It's important to note that these figures for home improvement expenditure are based only on owner-occupied housing and does not include any improvement expenditure by renters who are often not allowed to or are prohibited from making improvements to the property.
Growing Improvement Spending and a Rising Median Income
Spending on improvements is broken down into five different segments: less than $1billion (19.6%), $1 billion- $5 billion (52.9%), $5 billion - $10 billion (19.6%), $10 billion - $20 billion (5.9%), and $20+ billion (which only included California). As we can see, the majority of states are forecasted to spend between $1 billion and $5 billion on home improvement in 2019. These means that these are markets where the construction industry is thriving. This is also up from last years estimates of only 50.9% of states spending in this range.
This growth is likely contributed to the growth in median income that has been experienced throughout the country. Income levels are beginning to exceed pre-recession levels. Additionally, many homeowners are choosing to improve their housing rather than purchasing new homes with upgrades already installed. This has resulted in the overall value of improvements also increasing, given that the quality of improvements is more than when they are made for resale value. The combination of these factors has likely contributed to the growth we see in improvement spending.
Nearly 31% of Homeowners Make Improvements in Each State
This figure shows the variance in the amount spent on home improvements in the U.S. While California spent over $20.1 billion, Wyoming only spent $400 million on home improvements for owner-occupied housing. However, while there is great variance in the amount spent on home improvements, the percentage of housing that made improvements was relatively stable across all states with only 3% variance, ranging from 29% to 32%. States that have greater numbers of owner-occupied housing also spend the most on improvements. This indicates that these states are more lucrative markets to target. New York is of particular interest as it is in the top 10 states in terms of owner-occupied housing making improvements, the amount spent per improvement, and overall owner-occupied housing units.
Stronger Construction Market in States with Higher Population and Spending
With median incomes growing and trends in improvement over buying new homes continues to gain popularity, the construction market will be positively impacted. Focusing on states that are spending more on improvements with high populations is a wise decision for anyone in the construction market looking to expand their business. However, the potential for growth via convincing the other 68-71% of homeowners not making improvements in each state also exists; but keep in mind that it may end up being more expensive targeting these homeowners than pursuing customers in the low-hanging fruit states where homeowners are already actively seeking improvements.