Americans are spending more than ever on home remodeling.
The home remodeling market grew to $425 billion in 2017, thanks in part to an aging housing stock, according to a report from the Joint Center of Housing Studies at Harvard University.
Investing in home improvements and maintenance represents a growing share of residential spending since the Great Recession. Another driver has been the rising price of homes. As prices go up, owners have more equity, which they can borrow against to pay for repairs.
The Joint Center predicted spending would stay strong over the next decade, thanks to older homeowners remodeling to age in place and increasing homeownership among younger people.
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The increasing frequency and cost of natural disasters has escalated how much homeowners spend on restoring their properties. After averaging $14 billion from 1994 through 2003, annual spending for disaster repairs been at least $22 billion since.
The South and Midwest have seen the highest spending in recent years. (Learn how homeowners insurance can protect your home from disaster.)
Who's doing the remodeling?
The number of homeowners aged 55 and older has increased 60% in the last 20 years, from 26 million to more than 42 million, according to the Joint Center on Housing Studies report. This age group now makes up more than half of all owners.
Over the same period, home improvement spending among all homeowners has increased, but particularly for the 55-and-older crowd, who spent 57% more per person in 2017 than they did in 1997. Many of these people are making improvements to make their homes more accessible. About 3 million homeowners reported one or more projects in 2017 had the purpose of improving accessibility for elderly or disabled people, adding features like single-floor living, no-step entry and extra-wide doors and hallways.
"While newer homes are more likely to offer these features, the shortage of accessible units will continue, particularly in slower-growing areas of the Northeast and Midwest where homebuilding is more constrained," the report said.
How people are paying for home improvements
Given these trends, it makes sense to make sure you're prepared to invest in your own home improvements. Most people rely on cash to finance home improvements, but as projects become more expensive, they turn more to alternative sources of funding, like home equity loans.
Planning your own home renovation? Be aware that nearly half of home renovations go over budget. One way to avoid this is to carefully vet contractors and work with them ahead of time to set a realistic scope for your project. One of the most common reasons for projects exceeding their budget is because of changes to plans once work has already begun.
Learn more about how to budget for a home renovation.
Image: Brad Wilson