The Strange Way Rising Interest Rates Have Rewritten the Way We Renovate Our Homes
Rising interest rates have not only thrown a wrench into home sales but have caused some pretty seismic changes in home renovation, too.
According to the just-released 2023 U.S. Houzz & Home renovation report of more than 46,000 respondents, nearly 3 in 5 homeowners remodeled or redecorated their homes last year, and nearly half made repairs. And this urge to revamp will carry firmly through 2023, the report says. More than half of homeowners (55%) are planning renovation projects in the next year.
What’s spurring the continued interest in home reno? It seems partially fueled by the fact that people are planning to stay put in their homes for the long haul, rather than sell and upsize to a bigger and better place.
“Faced with shortages of housing stock and high interest rates, we’re seeing homeowners update their current home to make the space more functional for the long term,” said Liza Hausman, vice president of industry marketing at Houzz.
Back when the housing market was hot a year or two earlier, many homeowners renovated in order to sell their homes for top dollar. But now, most renovations are geared to serve the homeowner instead.
According to the survey, more than 61% of homeowners said they plan to stay in their homes for 11 years or longer, following their renovation. Meanwhile, the share of homeowners undertaking renovations with plans to sell has declined by half since 2018 (6% this year, compared to 12% in 2018).
Curious what people are doing to spruce up their homes for keeps? Here are some of the top renovation trends from the report.
Additions are all the rage
With more homeowners outgrowing their homes yet unable to upsize to a bigger house, it’s no surprise they’re carving out more space.
One in 10 of Houzz’s survey respondents built an addition in 2022, compared to just 8% each year from 2018 through 2021. That addition could be an extra bedroom, home office, or even an accessory dwelling unit for aging in-laws. So let this serve as inspiration: When you lack sufficient square footage, there are plenty of ways to add more.
People are adding more living space to their existing homes.(Houzz.com/aamodt/plub architects)
People are ditching the outdoors to renovate within
In 2022, interior spaces were the most popular areas to renovate (72%). And as for what’s on the outside? Well, outdoor upgrades declined for the third year in a row. This makes sense when you figure that in 2020, many people were spending more time outside, owing to the pandemic. So the investment in those spaces spiked. In 2022, however, only 51% of respondents were planning to make outdoor improvements.
Exterior paint projects increased by 1% in 2022.(Houzz.com/ONiT Painting)
That being said, 28% of homeowners still decided to beautify their landscaping, and 16% made lawn or patio/terrace upgrades. New exterior paint and windows also increased by a percentage point to 21% last year.
So while improved interiors and enhanced functionality are the trends du jour, keeping things pretty on the outside still seems to matter to some degree.
Kitchens and bathrooms are first in line for a reno
When it comes to interior makeover priorities, it’s probably no surprise that kitchen (28%) and bathroom (25%) remodels are at the top of the refresh list.
Kitchens and primary bathrooms also command the highest median spend—at $20,000 and $13,500, respectively. For those with a smaller renovation budget, however, remember that small changes can have a big impact, too.
“Upgrading faucets in a home is a great way to make a big difference in style without having to do a full remodel—something we’re seeing interest in from homeowners today,” says Jen Sommer, the builder and installer marketing segment manager for Moen.
Replacing outdated brass fixtures with matte black can entirely change the look of your bathroom.(Moen.com)
Matte black finish in both kitchen and bath faucets and fixtures is apparently the fastest growing trend in this area.
“This upgraded finish is in demand on all styles—from modern to traditional—and fits decor from industrial to farmhouse to midcentury modern,” says Sommer.
Older homes mean more replacement parts needed
The Houzz survey also found that many homeowners are undertaking home-system improvement projects, especially as the median home age in the U.S. continues to rise.
To bring things to code (or just into this decade), nearly 3 in 10 homeowners upgraded plumbing in 2022, closely followed by electrical (28%) and home automation (25%).
Upgrades to HVAC systems were also undertaken by more than 1 in 5 existing homeowners and—out of all the “systems” renovations—had the highest median spend in 2022 (costing about $5,000 to $5,500).
Smart lighting is a bright idea
When it comes to renovations, many homeowners are seeing the light. In fact, light fixtures were the most popular indoor technology purchase among renovating homeowners in 2022 (55%).
Better, smarter lighting is an upgrade people love.(Houzz.com/Advance Design Studio, Ltd.)
Also illuminating to note is that the share of homeowners opting for smart lighting—which can be controlled from a mobile device—grew from 14% in 2021 to 17% in 2022. And it’s a trend that seems destined to stick.
Brian Fitzpatrick, assistant product design manager for Visual Comfort & Co., agrees that there is definitely demand for smart lighting solutions, along with full smart home integration and lighting.
“We are continuously looking for opportunities to expand smart options for decorative lighting, be it a smart fixture, wall switch, or other adaptable accessory,” says Fitzpatrick. “Smart technology for the home isn’t a trend but the future of the industry and design, so it’s always top of mind when we are developing new product.”
Baby Boomers are most likely to want a do-over
Building on the “we’re not going anywhere” theme, it seems that Baby Boomers constitute the majority of homeowners renovating today (59%). Gen Xers are a distant second, accounting for 27% of home renovations. Millennials are even less likely to engage in fixing things, at 9%; and Gen Z (aka Zoomers) barely register a blip at 0.1%.
Interestingly, however, Gen Xers slightly surpassed Baby Boomers when it comes to the median amount spent on renovations, for the first time in 2022 ($25,000 versus $24,000 respectively).
How much are homeowners spending on renovations?
Homeowners are also pouring a lot of money into these projects, with the median amount spent on home renovations in 2022 hovering at $22,000 for small updates and $140,000 for more in-depth overhauls—such as the ones often completed on kitchens.
And 82% of homeowners rely on their savings to fund their renovations, rather than taking out loans to get the job done.
They’re also willing to hire contractors when it comes to square-footage enhancing renovation projects. In fact, more than 9 in 10 renovating homeowners (91%) relied on professional help for their remodeling projects in 2022—up by 2 percentage points, year over year (89%).
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