Home improvement spending has increased steadily during the last nine years. By the fourth quarter of 2018, spending had reached a new high, adjusted for inflation. The two main drivers of remodeling and repair expenditures have been existing home sales and home-equity growth.
Added together across all home owners in the U.S., home equity has grown more than $9 trillion since its low-point during the Great Recession. Much of the growth in home equity during the last several years has been attributable to home price growth. CoreLogic’s Home Equity report found that the average homeowner gained $9,700 in home equity during 2018. The amount gained varied widely by location, as home equity was affected by the value of homes, new mortgage debt and the appreciation rate by locale. On average, homeowners in Hawaii, Idaho and Nevada had equity growth of about $25,000 or more, reflecting either high values or rapid appreciation. In contrast, owners in Connecticut, Louisiana and North Dakota experienced declines due to mortgage debt growth or declining prices. (Figure 1)
Using CoreLogic’s public records data, we have also found that the median number of years that homeowners keep their homes has increased by four years since 2007. Homeowners who stay in their home longer and have substantial equity growth are more likely to spend on upgrades and remodeling.
Existing home sales are the other important driver of home improvement spending as new owners often remodel as part of their move. Increases in existing sales and equity gains by long-duration owners have spurred growth in home improvement spending to record levels. (Figure 2)
While we expect existing sales in 2019 to be about the same number as 2018, rising material and labor costs and increases in spending by existing owners are expected to add to home improvement spending during the coming year. Harvard’s Joint Center for Housing Studies has forecast a 5.1 percent increase in remodeling and repair spending during 2019.
Note: For more information visit the Q4 2018 Homeowner Equity Report or press release.
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