So who is hiring all the contractors and spending all that money at home improvement stores?
The baby boomers. Or at least that’s what a new Harvard University study has found.
A report from the Joint Center for Housing Studies found that boomers are one of the most significant drivers of the record spending on home improvement last year, and their influence on this market likely will continue to grow. The report predicts that homeowners 65 and older will make up one-third of all improvement expenditures by 2025, doubling their share from 1995-2005.
When you include all older households, namely Generation X, their home improvement projects will make up an even larger share of the remodeling market, with their share of spending rising from less than 52 percent in 2015 to more than 56 percent in 2025.
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“Over the coming decade, the aging baby boomers and gen-Xers will play an even larger role in the remodeling market,” analysts wrote. “Average per owner improvement spending is projected to increase by more than 10 percent among homeowners age 55 and over, while the number of homeowners in this age group soars at twice that rate.”
The Harvard analysis also found that home improvement spending in the 25 biggest metro areas accounted for about 45 percent of the national total, with spending per owner in those metros at $3,400, about 15 percent higher than the 2015 national average. Home values were also higher for those metro areas. The top 25 metro’s median home price in 2015 was $270,000 — more than one-third higher than the national average.
This correlation doesn’t hold true for Miami, however. Or for Chicago, Detroit, Phoenix, and Riverside. Because home prices had only partially recovered from their drop in these cities, “owners in these areas spent nearly 15 percent less on improvements than the average across all 25 major metros,” the study noted.
Miami also made it to the top 10 metro areas with the lowest “Homeownership Rate Among Households Under Age 35 in 2015.” Orlando and Tampa were the other Florida cities on this dubious list. The only state that claimed more cities was California, with four unaffordable metro areas.
Home-improvement expenditures are expected to increase about 2 percent every year through 2025 for all age groups. In dollar amount: $269 billion in 2025, up from $221 billion in 2015. Some of that surge can be attributed to the boomers’ desire to age in their own homes. The Joint Center found that 2.1 million homeowners reported having invested in home modifications during 2014-15 to improve accessibility. This kind of accessibility modification is expected to be strongest where homes are older, namely the Northeast and Midwest.
When boomers no longer are able to sell their homes, the housing supply will open considerably, according to the study. Analysts project that 12 million homes will go up for sale by 2025 when older homeowners cannot stay in their homes.
Once younger homeowners move in, they, too, will want to invest in upgrades. That, however, depends on several factors. Home equity and home values plays an important part in a homeowner’s ability to upgrade, the study notes.