Home Renovation Expected to Stay Strong in 2018, Says Houzz
Palo Alto, CA, June 26, 2018-2018 is on track to be another solid year for home renovations, with half of homeowners on Houzz planning to begin or continue renovations (51%), according to the seventh annual Houzz & Home survey of nearly 150,000 respondents in the U.S. Continuing the boom of the past three years, renovation activity and spend was strong in 2017, with 58% of homeowners renovating their homes, at a median spend of $15,000. While long-term owners drive the majority of home renovations, recent homebuyer share is slowly ticking up.
Kitchens and bathrooms topped the list of interior remodels for both renovation frequency and spend in 2017, with nearly one-third of renovating homeowners tackling kitchens (31%), followed by guest bathrooms (27%). New homeowners are more likely to tackle kitchen renovations than long-term homeowners (40% and 39% of first-time and repeat buyers, respectively, versus 30% of long-term homeowners). At 24%, master bathrooms overtook living/family rooms as the third most popular room to renovate.
The median spend on kitchen remodels saw a 10% year over year increase ($11,000 in 2017 from $10,000 in 2016). A similar increase was seen for major remodels of large kitchens (more than 200 square feet), which increased from a $30,000 median renovation spend in 2016 to $33,000 in 2017. Some living areas also saw increased investment with median master bedroom spend up 33% ($2,000 in 2017 versus $1,500 in 2016) and median home office spend up 20% ($1,200 in 2017 versus $1,000), while living/family rooms held steady at $3,000 median spend.
"All of the evidence from our research points to 2018 likely being another robust year for the home improvement industry,” said Nino Sitchinava, Ph.D., Houzz principal economist. “Recent buyers and long-term homeowners alike are keen on investing in major projects. Kitchens and bathrooms continue to fuel spend, while exterior features and systems, such as home security and automation, are on the rise. Houston’s rebuilding activity has brought the city’s median renovation spend up to one of the highest in the nation, while coastal cities maintain nearly double the median national spend. We expect the momentum to continue in 2018."
More Deliberate Planning and Budgeting
Over the past two years, homeowners have become more deliberate in planning and budgeting for renovations and were 12% more likely to set a budget in 2017 than in 2015 (77% and 69%, respectively). However, the propensity to go over budget varies little over time among those who set a budget (46% in 2017 versus 44% in 2015).
When it comes to funding renovations, cash remains king (85%), followed by credit cards and loans secured by home value (33% and 11%, respectively), including home equity lines of credit and mortgage refinancing.
Houston and Los Angeles See Largest YOY Spending Gains
Following a year of record devastation by the 2017 Atlantic hurricane season, median spend on home renovations in the Houston metro area increased by 60 percent, from $15,000 in 2016 to $24,000 in 2017, making it the fourth highest spend among the top 50 U.S. metros last year. After Houston, the second largest increase in median spend took place in the larger Los Angeles metro area, increasing by 25% from $20,000 in 2016 to $25,000 in 2017. This is likely driven in part by the damage inflicted by Southern California wildfires. Consistent with widespread hurricane and wildfire activity in 2017, natural disasters are cited 4% percent).
Median spend tends to be highest in major coastal cities with San Jose ($30,000), San Francisco ($25,000) and Miami ($21,000) making the top five list, along with Houston and Los Angeles. In contrast, Columbus, Ohio accounts for the lowest median renovation spend among the top 50 metros at $10,000.
Renovations Worth the Cost
While improving a home’s design or functionality are the top considerations during renovations (89% and 84%, respectively), increasing the home’s resale value is an important renovation consideration for over two-thirds of renovating homeowners (69%). It is not surprising then, that some of the most frequent renovation projects, are also the ones that are perceived to contribute the most to the home's resale value. Specifically, four in five renovating homeowners report that kitchens and master bathroom upgrades increased the value of their home, above and beyond any other renovation project. In fact, one third of kitchen renovators believe that their home value has increased by at least the full amount of the project cost post-renovation (33%).
Home Security and Automation System Upgrades Increasingly Popular
2017 was a turning point for home security and automation adoption, with home security installations up 50% over the last two years (10% in 2015 versus 15% in 2017). Meanwhile, home automation installations, such as thermostats, electronics and lights, grew by 18% over the last two years (19% in 2015 versus 23% in 2017).
The largest gains in adoption of home security and home automation systems were among long-term owners who appear to be catching up to more tech-savvy recent buyers. Over the last two years, long term homeowners were 22% more likely to install home automation systems and 57% more likely to install security systems, compared to 5% and 18%, respectively for first-time homebuyers and 9% and 33%, respectively for repeat homebuyers.
Home Professionals in Demand
Nearly nine in ten homeowners chose to hire a home professional for renovation needs (88%). As demand climbs for systems and exterior feature upgrades, homeowners are more likely to hire specialty service providers like electricians and painters to complete work without the involvement of a construction manager, such as a general contractor or builder (51% in 2017 versus 44% in 2015). In fact, this trend is universal among all segments of homeowners (48%, 49% and 50%) for first-time buyers, repeat buyers and long-term homeowners, respectively). That said, repeat homebuyers are significantly more likely to hire a construction manager or a design-related professional (45% and 23%, respectively), as compared to first-time buyers (36% and 11%, respectively) or long-term homeowners (35% and 15%, respectively).
When it comes to hiring, the study found that homeowners consider a very limited number of professionals. For example, homeowners seriously consider only three general contractors or builders and only two architects or designers for their renovation projects.