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In a presentation at a REALTOR® University Speaker Series, Dr. Kermit Baker, Senior Fellow of the Joint Center for Housing Studies of Harvard University, shared his research findings on the emerging trends in home remodeling.[1] Dr. Baker presented estimates that home improvement projects are expected to hit an all-time high of $324 billion by the end of 2015, a recovery to the 2007 level. Home remodeling spending on both owned homes and rentals peaked in 2007 at $324 billion as homeowners spent to improve home values that were falling during the housing collapse (Chart 1). Spending dipped to $281 billion in 2011 as homeowners reined in on major homeowner improvement projects amid weak income and job growth. With the economy continuing to improve and with rising home equity that can be used for home improvement financing, home owners have started to spend more on improvement and maintenance projects. Owner improvement projects are the “big” discretionary spending such as kitchen and bath remodeling and system upgrades which account for about two-thirds of the total home improvement market.
Dr. Baker noted that baby boomers (born 1945-1964) are still the primary drivers of home improvement spending, accounting for about half of total home improvement spending. However, Gen-Xers (born 1965-1984) are gaining share, with their share up from 5 percent in 1995 to 30 percent in 2013 (Chart 2). Recent buyers, who moved into the home within the past three years, spend 25 percent more on the average than non-recent buyers.
With declining mobility among baby boomers, spending for accessibility features that enable senior household members to age in place is expected to be a major driver of home improvement spending. Currently, many households with aging members lack accessibility features (Chart 3). Accessibility features refer to features such as room and full-bath on entry, no steps on entry, extra-wide hallways and doors, and in-home elevators . The 55+ households are heavily concentrated in the Midwest and Northeast.
Why This is of Interest to REALTORS®: People undertake home improvements before or after selling a home. Homes that are in good condition and that cater to a buyer’s needs tend to sell faster and at a better price. Buyers of home with multigenerational family members will likely be looking for home accessibility features for senior members.
[1] Dr. Baker is Director of the Remodeling Futures Program of the Joint Center for Housing Studies of Harvard University. He is also Chief Economist, American Institute of Architects.
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