While Americans may be pulling back on their home remodeling plans for the moment, experts predict that an historic boom is coming for the industry. Eric Finnigan, VP of research & demographics at John Burns Real Estate Consulting, highlighted three factors likely to drive growth in the sector in the coming years.
First, Finnigan noted that 24 million homes will soon require repairs or upgrades, ranging from roofs, floors, heating and cooling systems, kitchens, bathrooms, and more. Many of these homes are entering their prime remodeling years, typically between 20-40 years old. Second, three-quarters of mortgage borrowers are currently locked in with mortgage rates at 4% or lower, and while many homeowners will stay put for as long as possible, they will likely need to upgrade their homes eventually. Third, homeowners currently have record levels of equity, giving them the means to pay for renovations either now or in the future.
However, while expectations for future remodeling demand are high, current dynamics in the market have seen these projects put on hold in recent months. Home Depot, for instance, recently reported that it expects demand for home improvement to moderate. Comparable sales in the U.S. fell 0.3% for Home Depot in Q4, missing expectations for a 0.3% gain.
Nonetheless, Finnigan predicts that demand for projects will remain robust in the years ahead as housing turnover slows amid higher rates and an aging housing stock. “There’s fewer listings out there, fewer listings of homes, fewer homes sold, but [the] underlying demand for remodeling is higher than it’s been probably for a decade,” Finnigan said. “And it’s going to be higher for longer.”
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