Recent reports have shown a decline in the number of homeowners undertaking remodeling projects. This decrease in activity is reflected in key indicators such as the Leading Indicator of Remodeling Activity (LIRA) and the NAHB/Westlake Royal Remodeling Market Index (RMI). While the LIRA peaked at 17.3% in the third quarter of 2022, it has been steadily declining since then, dropping by 1.2% in the first quarter of 2024. Similarly, the RMI, which measures remodelers’ sentiment about the market, peaked at 87 points in the third quarter of 2021, and has been on a downward trend ever since, reaching 66 points in the first quarter of 2024.
The peak of the Covid-19 pandemic saw a surge in home renovation activity as homeowners sought to improve the spaces they were spending more time in. Key areas such as kitchens, bathrooms, home offices, and even outdoor spaces like pools witnessed significant investment. Stimulus checks and accumulated savings from restricted activities during lockdowns further fueled this renovation boom. However, as the pandemic wanes, these savings have dried up, leading to a decrease in both the number and scale of remodeling projects.
Despite a decrease in the number of projects, homeowners are now spending more per project. This increase in spending is attributed to broader inflation and rising costs of materials and construction labor. According to Angi’s State of Home Spending report, the average spending on home improvements in 2023 was $9,542, a 12% increase from the previous year. However, the number of projects completed dropped to an average of 2.8 in 2023 from 3.2 in 2022, reflecting the impact of inflation on household budgets.
While overall remodeling activity is expected to moderate from its pandemic highs, certain factors continue to drive demand for remodelers. Firstly, homeowners are living in their properties for longer periods, with the average homeowner’s tenure now at 11.9 years. This is nearly double the average of 6.5 years in 2005, driven largely by aging baby boomers who prefer to age in place. Aging-in-place remodeling has emerged as a significant subsector in the remodeling market, with retirees investing in energy-efficient and safety-related upgrades to their homes.
Another crucial factor contributing to the demand for remodeling is the aging housing stock in the United States. The median age of all owned homes in 2021 was 41 years, with homes built in the 1980s or earlier constituting 60% of the existing stock. This aging housing market necessitates substantial investment in maintenance and upgrades to ensure the longevity and livability of these properties. The lack of significant new housing construction in the past decade has further accentuated the need for remodeling and renovation in the existing housing stock.