Home Improvement Spending Expected to Surge
A recent Harvard study brings good news for contractors: Business will be booming again in 2021. Here's why.
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Home improvement spending is showing no signs of slowing down, according to a recent study by the Joint Center for Housing Studies (JCHS) of Harvard University. In fact, spending is expected to increase in nearly every major U.S. metropolitan area in 2021.
The projections, released annually in the first quarter, are “designed to project the annual rate of change in spending for the current quarter and subsequent three quarters,” according to the study. It found that 42 of the 46 largest U.S. cities are expected to see increased spending on home improvement projects. The exceptions: New York City, Denver, Boston and San Jose.
The Rise in DIY and Home Improvement Spending
Home improvement popularity grew immensely in 2020 during the coronavirus pandemic, largely due to stay-at-home orders and employees working from home. Large metro areas saw an estimated two percent rise in remodeling gains in 2020, according to the study.
Nationally, that average is expected to grow to almost five percent in 2021, with 14 metro areas projected to grow by six percent or more. Seventeen additional regions are projected for gains between three and six percent, according to the study.
There are several free tools that help estimate the cost of a DIY or contractor remodeling project. Here we’ve rounded up the top remodeling estimators, with highlights, so you can find the best one for your project.
Top Cities Where Increased Spending Is Expected
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The cities with the highest projected growth on the JCHS list were San Antonio, Phoenix, Charlotte, Tucson, Ariz., Austin, Tex. and Oklahoma City. Those cities are expected to have the largest percentage increase in spending.
It’s important to understand not all home improvement projects offer the same return on investment. Here are the projects that have the best cost vs. value.
“The largest remodeling spending gains are projected to occur in relatively more affordable metros in the Sunbelt,” said Abbe Will, associate project director in the Remodeling Futures Program at the JCHS.
Harvard’s study supports a similar study produced by Axiom, a Minneapolis, Minn. marketing firm. Axiom found that more than 90 percent of DIYers said they plan to spend as much or more time on home projects in 2021 compared to last year, and that 56 percent of respondents intend on hiring a professional for all or part of projects. Approximately 64 percent of projects planned for 2021 are expected to cost more than $1,000, according to Axiom.
Thirty-one percent of Axiom’s survey responders said they were planning yard and landscape work, more than any other project type. Twenty-five percent listed fixing or building a deck/patio. At-home entertainment areas have increased in demand with bars and restaurants shut down at times during the pandemic.
“Homeowners said they definitely gained confidence in their own skills because of what they accomplished last year,” said Stacy Einck, building products practice lead at Axiom. “Once you know how to do something and believe you can handle the work, it becomes a big motivator to dive into the next project.”
Home Improvement’s Housing Market Impact
Approximately 5.64 million homes were sold in 2020, an increase of 5.6 percent from 2019, according to online real estate marketplace Zillow.
Mortgage rates, which dropped to record lows last year during the height of the pandemic, have fluctuated in the first month of 2021. Lower rates, coupled with historically low inventory in houses for sale, have driven up prices. In January, Zillow predicted these cities would be the hottest and coldest housing markets.
“Broad strength in house price appreciation, existing home sales, and residential construction suggest that many metros will see greater renovation activity this year,” Will said.
However, here’s why Federal Reserve Chairman Jerome Powell believes high housing prices are unsustainable and could be dropping soon.