In recent years, homeowners have been investing more in renovations, as high interest rates and persistent inflation have driven up the costs of everything from flooring to refrigerators.
The home improvement surge intensified early in the pandemic, with Americans enhancing their homes to better accommodate remote work and learning. However, this renovation frenzy now seems to be cooling down.
According to the Associated Press, Harvard University’s Joint Center for Housing Studies’ latest leading indicator of remodeling activity, or LIRA, suggests homeowner spending on renovations and repairs will fall to $449 billion this year. That would represent a roughly 7% drop from 2023.
Spending on home remodeling was down 1.2% in the first quarter from a year earlier — the first annual decline in more than a decade. Historically, annual growth in home improvement spending has averaged 5%.
Many factors are contributing to the slowdown, including elevated interest rates, stubbornly high inflation and a national home sales slump. Home sales are one of the biggest drivers of spending, with homebuyers typically investing most heavily in upgrades or repairs in the first three years after buying their home.