Home remodeling surpassed its pre-recession peak in 2015. Nationwide, homeowners spent $340 billion in home improvements during 2015, up from the previous peak of (inflation-adjusted) $319 billion in 2007, according to Harvard University’s Joint Center for Housing Studies.
The Joint Center for Housing Studies anticipates the home remodeling market will continue to increase in 2017. However, the reason for the growth may surprise you.
It’s not that more homeowners are remodeling their homes — rather, a relatively flat number of homeowners are spending more money on home improvements in recent years. And who are the homeowners doing the lion’s share of the spending? Baby Boomers.
As homes become more expensive, especially here in California, young homeowners are having a hard time breaking into homeownership. For of those that do make it through the scrum, even fewer have money left over to make improvements.
But the future outlook is good for home improvement across households of all age groups — especially Baby Boomers. According to the Joint Center for Housing Studies report:
“The baby-boom generation has led home improvement spending for the past 20 years, and their influence shows no signs of waning. Their increased longevity and desire to live independently into old age will boost demand for remodeling projects that improve the accessibility of their homes.”
In fact, the report forecasts the over-65 crowd will contribute one-third of home improvement spending by the year 2025, likely financed by their retirement savings. Householders over the age of 55 will make up more than half of improvement spending. This is partly due to the increasing population of retirees and this age group having greater access to home equity. It’s also due to the types of improvements they are making.
What types of improvements are the legions of Baby Boomers making? Improved accessibility features that are necessary to facilitate independent living top the list. According to a recent article in the Sacramento Bee, the most common accessible improvements include:
- lever doorknobs instead of the traditional turning knobs;
- motion-sensor light switches and faucets;
- non-slip floors; and
- handicap-accessible bathrooms.
The future of retirement homes
Of those unable or unwilling to convert their home to be more accessible in their older years, many will sell their old homes and move in with family or into assisted living facilities. When their homes go on the market, most will need to be upgraded to suit the amenities demanded by the next generation of homebuyers (Generation Y). This will add another boost to home improvement spending.
The rest of these retiring Baby Boomers will prefer to sell their old, McMansion-style homes where they raised their children and buy smaller, more accessible homes in the same community where they can retire-in-place. The types of homes that will receive a demand boost from this segment of retirees include condominiums that:
- are walkable;
- are in urban locations (near family members and cultural amenities);
- have homeowners’ associations (HOAs) that take care of external maintenance and landscaping; and
- are accessible for an aging population.