Retail Observer

RETAILOBSERVER.COM APRIL 2017 32 AGING HOMEOWNERS DRIVE GROWTH IN REMODELING Millennials begin to gain footing H arvard University research center released a new report on the home improvement industry, and homeowner spending on remodeling is expected to see healthy growth through 2025. Demographically-based projections suggest that older owners will account for the majority of spending gains over the coming years as they adapt their homes to changing accessibility needs. Although slower to move into home ownership than previous generations, millennials are poised to enter the remodeling market in greater force by buying up older, more affordable homes in need of renovations, according to Demographic Change and the Remodeling Outlook, the latest biennial report in the Improving America's Housing series from the Harvard Joint Center for Housing Studies. The residential remodeling market includes spending on improvements and repairs by both homeowners and rental property owners, and reached an all-time high of $340 billion in 2015, surpassing the prior peak in 2007. Spending by owners on improvements is expected to increase 2% per year on average through 2025 after adjusting for inflation, just below the pace of growth posted over the past two decades, and about on par with expected growth in the broader economy. The large baby-boom generation has led home improvement spending for the past twenty years, and its influence shows no signs of waning. Older homeowners will continue to dominate the remodeling market, as they make investments to age in place safely and comfortably. Expenditures by homeowners age 55 and over are expected to grow by nearly 33% by 2025, accounting for more than three-quarters of total gains over the decade. The share of market spending by homeowners age 55 and over is projected to reach 56% by 2025, up from only 31% in 2005. Gen-Xers are now in their prime remodeling years, and while some are still recovering from home equity losses after the housing crash, many in this generation will undertake discretionary projects deferred during the downturn. And as younger households move into homeownership, they will supplement the already thriving improvement market. "With national house prices rising sufficiently to help owners rebuild home equity lost during the downturn, and with both household incomes and existing home sales on the rise, we expect to see continued growth in the home improvement market," says Kermit Baker, director of the remodeling futures program at the Joint Center for Housing Studies. Even though increasing house prices are encouraging home- owners to reinvest in their homes, they also are raising housing affordability concerns among younger buyers. Climbing mortgage interest rates and rising house prices not only make homeownership more difficult for younger households, but leave those who are able to buy with fewer resources to make improvements and repairs. H O M E O W N E R S P E N D I N G O N R E M O D E L I N G I S E X P E C T E D T O S E E H E A LT H Y G R O W T H T H R O U G H 2 0 2 5 . D E M O G R A P H I C A L LY B A S E D P R O J E C T I O N S S U G G E S T T H AT O L D E R O W N E R S W I L L A C C O U N T F O R T H E M A J O R I T Y O F S P E N D I N G G A I N S O V E R T H E C O M I N G Y E A R S A S T H E Y A D A P T T H E I R H O M E S T O C H A N G I N G A C C E S S I B I L I T Y N E E D S .

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