It’s Too Expensive to Move—So Homeowners Are Remodeling

Key Takeaways

• The home remodeling and repairs expenses are expected in 2025 to reach $608 Billion, continuing the trend that began during pandemic. 
• The remodeling market has expanded by 27% since 2019, with spending on home upgrades and maintenance remaining high amid a slowdown in the housing market.
• Owners are motivated to spend more money on maintenance as they prepare for longer stay due to the affordability of their homes.

A new report shows that more homeowners are remodeling their homes rather than tackling an ever-expensive housing market.

According to a Harvard Joint Center for Housing Studies report, remodeling spending will reach $608 billion by 2025. This is a continuation of the surge that has occurred amid housing market changes resulting from the pandemic. The remodeling market has not reached the heights of 2022, when spending was a lot higher as housing prices soared.

“This extraordinary boom was driven by strong growth in the number of owners undertaking projects and in average spending, bolstered by a healthy labor market, record-high property values, and aging homes in need of investment,” Harvard's report said.

The report shows that remodeling expenditures have risen by 27% when adjusted for inflation between 2019 and 2023. Meanwhile, Americans are sitting on trillions of dollars of home equity they can use to fund renovations—and buyers are increasingly willing to pay up for renovated propries.

The report noted that the “remarkable growth” was partly attributable the unique circumstances of pandemics, including the surging demand for homebuying or renting along with increased time spent at home which both motivated as well as necessitated upgrades and maintenance.

Older homes and older owners mean more remodeling 

The report noted that as housing values rise and high mortgage rates make it more difficult to borrow, a larger share of people choose to stay in their home rather than move. The pandemic sparked a move to bigger homes in different locations as homeowners sought out new work-from home rules. However, Census Bureau data shows that homeowner mobility has declined sharply since the pandemic.

Despite that, the report showed that homeowners continued to invest in remodeling projects— necessary repairs or discretionary upgrades meant to improve a house’s value—as home sales declined and the rental market began to slow in 2022.

Harvard states that the median age of homes is expected to reach 44 by 2023. The demographics of the older homeowners also has an impact. 

The report stated that owners who stay in their homes are more likely to make improvements to their home to accommodate longer tenures and to address changing needs.

Remodeling can be a good investment for homeowners

According to studies, remodeling is worth it for homeowners hoping to sell. Zillow reported that buyers will pay nearly 4% more for homes that have been remodeled. That’s more than $13,000 over the average U.S. house.

Listings for remodeled homes attracted 26% more daily savings and 30% more shares online. Buyers said they would expect to spend 8% less on a house that “needs some work.” While this could result in a savings as high as $28,000, remodeling expenses can quickly eat away at those savings.

The report stated that “a remodeled home might come with a higher cost, but a buyer could spread this additional cost over a 30-year loan versus paying upfront for similar upgrades.” 

Costs of home improvements have also increased during this time. Harvard’s report shows that the average project cost per homeowner jumped from $3,300 to $4,700 in 2023. In 2023, an average professional project will cost $7,800. 44% of home improvements projects will cost $50,000 or more.