Home Remodeling Booms In Tight Housing Market
With more than a third of single-family homes selling above the asking price, that new home you’ve been looking for maybe the one you’re living in now – with a few alterations.
Home Remodeling Rising
The dramatic boom in home remodeling that revved up during the pandemic has shifted into a higher gear this year and looks to accelerate for years to come.
Lock-downs, layoffs, and business restrictions shrank the U. S. economy 3.5 percent in 2020. At the same time, home improvement expenditures grew three percent, according to research by Harvard University’s Leading Indicator of Remodeling Activity (LIRA).
Home repair and remodeling expenditures for 2020 totaled $339 billion. The year 2021 will see even more growth according to researchers and industry representatives.
“With the release of new benchmark data from the American Housing Survey, we’ve raised our projection for market size in 2021 by about $4 billion, or 1 percent, to $352 billion,” says Abbe Will, Associate Director in the Remodeling Futures Program at the Center.
What Will Your Projects Cost?
There is no direct answer to how much your remodel will cost. It depends on where you live and what you want to be done.
A survey by Home Advisor, an online home repair referral service, found that American households spent an average of:
- $8,305 on home remodeling,
- $3,192 on home maintenance,
- $1,640 on home emergencies last year.
Impact of the Pandemic
One factor triggering the boom has been Covid-19.
“There are a lot of households that were modifying their homes to their current needs – their current lifestyles during the pandemic,” says Fred Stokes, Senior Vice President, Pro Sales and Services at Lowe’s Home Improvement. “So they were looking for a space for home offices, for home classrooms, for exercise rooms, for playrooms, outdoor living where they could comfortably sit to talk to neighbors or relatives.”
With more parents working from home and their children attending school online, the remodeling boom took off.
The Housing Market Squeeze
Often, home buying is motivated by a need for more space. That has been amplified by the pandemic. However, the supply of houses for sale is down, according to Redfin, a real estate research and marketing firm.
Currently, only 644,859 homes are listed for sale in the United States, says Redfin. That is a decrease of 49.6 percent over the past year. In addition, new listings are down 17.3 percent to 484,090. That is a one and a half months supply. The result is a hike in home value and sales prices.
Homes Are Worth More
United States home values have gone up 9.9 percent, according to online real estate marketplace Zillow. Looking ahead, Zillow predicts home values will rise 11.4% in the next year.
While home values have gone up and are rising, home sale prices have jumped even more and are trending higher.
Prices Higher and Rising
“Home prices nationwide were up 14.4% year-over-year in February,” reports Redfin. “At the same time, the number of homes sold rose 5.7% and the number of homes for sale fell 49.6%.”
That 14.4 percent price increase means the median sales price of a home today is $336,159, according to Redfin.
Top 10 Metros With the Fastest-Growing Sales Price
- Akron, OH 38.9%
- Delray Beach, FL 37.8%
- Detroit, MI 37.6%
- Baltimore, MD 32.1%
- Dallas, TX 29.0%
- Fort Lauderdale, FL 28.8%
- St. Louis, MO 28.2%
- Alpharetta, GA 27.4%
- Spokane, WA 27.1%
- Buckeye, AZ 26.4%
High Demand Fuels Bidding Wars
Homebuyers are chasing prices upward and, sometimes, overtaking them.
Over one-third, 36.1 percent of homes purchased in the last year have been for more than the asking price, says Redfin.
“Homes that sold above list price likely received multiple offers,” according to a Redfin report. “A high or growing percentage of homes selling above list price indicates that the housing market is competitive and bidding wars are becoming more common.”
Supply of Single Family Homes Getting Older
“Ultimately, the home remodeling outlook is improving for 2021 and beyond,” says Caroline Blakely, president and CEO of Rebuilding Together. Her firm is a nonprofit home safety and restoration company. “Of the factors we think will support and increase all activity in the long term include the continual aging of our housing stock. Half of owner-occupied homes are at least 40 years old.”
According to the U. S. Census Bureau’s American Housing Survey, the median home was built in 1974. That makes the average home is 47 years old. Of course, as a house age, it needs more maintenance.
The Millenial Home Rush
Another factor in the reduction of home supplies and remodeling boom is the movement of millennials to homeownership.
“I think the main takeaway is that this was really building out of longer-term trends that we were seeing in this industry,” says Stokes. “For example, a lot of home improvement last year was driven by the movement of younger households out of urban areas into the suburbs, giving up their urban rental units and buying a home.”
A report from the National Association of Realtors (NAR) backs up what Stokes says.
The Home Buyers and Sellers Generational Trends Report finds that millennials make up the largest share of homebuyers at 37 percent.
An Uptick in Multi-Generational Homes
The same NAR report that found millennials are leading home purchases, also discovered multi-generational homes are on the rise.
The results of a paper by the U. S. Census Bureau’s Daphne Lofquist show that there were 4.3 million multigenerational households in 2020, which account for 5.6 percent of family households in the United States.
Last year 15 percent of home purchases were made to house two or more generations. Since 1990, multi-generation households have increased sixty percent, according to the U. S. Census Bureau.
Staying put, selling, or buying a home, you are probably in for some renovation expense and that will add fuel to the economy.
“If one million renters become homeowners,” says Blakely, “we think that will add $2 billion annually to the home improvement market on an ongoing basis.”
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