Fewer homeowners are remodeling, but demand is still ‘solid’

Fewer homeowners have been taking on remodeling projects, reports show. But don’t mistake it for a slow market.

The Leading Indicator of Remodeling Activity, an outlook measuring home improvement and repair spending on owner-occupied homes, peaked at 17.3% in the third quarter of 2022. The LIRA has been declining since, and slid 1.2% in the first quarter of 2024 compared to the prior quarter.

The NAHB/Westlake Royal Remodeling Market Index by the National Association of Home Builders reflects a similar decline. The RMI, which measures remodelers’ sentiment about the market, peaked at 87 points in the third quarter of 2021, and like the LIRA, has been consistently declining since. In the first quarter of 2024, the measure fell to 66 points, down one point from the previous quarter.

However, the RMI is still in territory where more remodelers see the conditions as “good” rather than “poor,” said Robert Dietz, chief economist of NAHB.

In a release for the group’s first quarter report, NAHB Remodelers Chair Mike Pressgrove noted that “demand for remodeling remains solid, especially among customers who don’t need to finance their
projects at current interest rates.”

The height of the Covid-19 pandemic brought with it a burst of home renovation activity.

Homeowners were eager to invest in the spaces they were spending so much time in: updating key spaces like kitchens and bathrooms, building out home offices and adding pools.

Some also had savings built up thanks to stimulus checks, and from activities they couldn’t do during early lockdowns — and rerouted that money toward home improvements and remodels, said Abbe H. Will, senior research associate and associate director of Remodeling Futures at the Joint Center for Housing Studies at Harvard University. In 2021, owners used cash from savings to pay for nearly four out of five projects, according to a JCHS report.

“We’re coming off such high levels of spending,” Will said.

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As Covid-era savings have dried up, so has that boost in activity.

Homeowners are doing fewer and smaller remodels. Yet they are spending more per project, in part due to broader inflation and higher costs for materials and construction labor.

Homeowners spent an average $9,542 on home improvements in 2023, a 12% increase from a year prior, according to the State of Home Spending by Angi. At the same time, the amount of projects decreased to an average of 2.8 projects in 2023 from 3.2 in 2022. The survey polled 6,400 consumers between Oct. 22 and Oct. 23.

The increase in home improvement spending, along the decrease in projects, suggests inflation corroded household budgets, according to the home services website.

While…