Study: Aging Homeowners Drive Growth in Remodeling

March 6th, 2017 by Editor

Homeowners are expected to accelerate spending on remodeling through 2025, according to Demographic Change and the Remodeling Outlook, the latest biennial report in the Improving America’s Housing series released last week by the Harvard Joint Center for Housing Studies. Spending should increase 2 percent per year on average through 2025 after adjusting for inflation, which matches growth in the broader economy during that time.

“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,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center.

Older owners will make up the majority of spending gains over the coming years as they adapt their homes to changing accessibility needs, according to the study. Millennials are also poised to enter the remodeling market in big numbers as they buy older, more affordable homes that need renovations.

The residential remodeling market includes spending on improvements and repairs by both homeowners and rental property owners. It hit $340 billion in 2015, an all-time high.

The baby boomers have led home improvement spending for the past 20 years, and they’ll continue to do so as they make investments to age in place. 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 31 percent in 2005.

Gen-Xers are now in their prime remodeling years. Some are still recovering from home equity losses after the housing crash, but many will undertake projects put on hold during the downturn, the report says.

Even though rising house prices encourage homeowners to reinvest in their homes, they also raise housing affordability concerns among younger buyers. Some demographic trends are also presenting challenges to a healthier remodeling market outlook. A disproportionate share of growth over the coming decade will be among older owners, minority owners, and households without young children — groups that traditionally spend less on home improvements.

“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.”

Finally, as a new generation of homeowners enters the remodeling market, specialty niches focused on energy efficiency, environmental sustainability and healthy homes are likely to see significant growth. Home automation— encompassing everything from entertainment systems to home energy management, lighting, appliance control, and security—is also emerging as a strong growth market, particularly among younger households.

Looking ahead, there are several opportunities for further growth in the remodeling industry. The retiring baby boom generation is already boosting demand for accessibility improvements that will enable owners to remain safely in their homes as they age. Additionally, growing environmental awareness holds out promise that sustainable home improvements and energy-efficient upgrades will continue to be among the fastest-growing market segments

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