Whether you’re a homeowner looking to buy or sell, a real estate pro studying the market to know what’s happening in your area, or involved in any part of the real-estate industry, it’s important to be up on trends.
But it’s also wise to know that trends change—sometimes fast and sometimes slow. Right now there’s continued confidence in both the housing and remodeling markets, according to the most recent San Diego-based LightStream Home Improvement survey this year (LightStream is the national online lending division of Sun Trust Banks). Of course, this may change over time with the Federal Reserve raising the interest rate. Nobody yet knows how higher interest rates may influence buying and improvements.
For now, 59 percent of homeowners plan to spend money on home improvement projects this year with 42 percent aiming to spend $5,000 or more, and 23 percent planning to spend at least double that amount–-the highest percentage since the first LightStream survey took place three years ago.
To best cater to home buyers and remodelers, it’s important to understand all the sub-segments of the buying public that want different housing options; know about any differences among those with different budgets; be aware of what projects are most appealing; and appreciate how geography may influence trends.
- Millennials. Those born between 1982 and 2004 have been living in large part in apartments since college or graduate school, yet they’ve greatly influenced many trends in interior design, fashion, food, and travel. And now that many are beginning to buy homes or condos on their own or with a spouse or partner, they are also ready to tackle home improvement projects. A recent Joint Center of Housing Studies at Harvard University study reports that since Millennials have worked hard to pay off student loan debt and are advancing in their careers, they can afford to consider renovating. In fact, 69 percent of Millennial homeowners plan to spend money on a project, the second highest of all age groups surveyed by LightStream, following Gen X’ers who came in first at 72 percent. When it comes to dollars planned on spending, 35 percent of Millennial homeowners aim to lay out $5,000-plus on renovations such as an addition, a swimming pool, technology such as home automation or solar panels to conserve energy.
- Generation X’ers. Those born between 1965 and 1980 lead all groups in home ownership and renovation dollars. Nearly three-quarters of this cohort, or 72 percent, plan to spend on home improvement projects this year.
- Baby Boomers. The oldest group surveyed, those born 1946 to 1964, intend to remodel and upgrade but not to the same extent as the other cohorts. Some will remodel kitchens and bathrooms but an even greater percent will spend on home repairs and technology upgrades. Among the most popular are outdoor redos of decks, patios, and landscaping. When asked how much they plan to spend, 50 percent of respondents said more than $5,000 while 26 percent said more than $10,000. The prime reason is to allow them to age in place. Of note is that their overall expenditures are expected to drop to 57 percent, an 11 percent decrease from the year before.
- Wealthy. This segment, described as making $100,000-plus annually, is renovating and spending more this year, possibly because of the significant uptick in the stock market. In fact, more than 60 percent plan to tackle a project in 2017 and will spend more when doing so—a 100 percent increase from the prior year.
BY GEOGRAPHIC REGION:
Jumping from last to first, 64 percent of homeowners in the West plan home improvement projects this year, a 10 percent increase from last year. The percentage in the South is just slightly smaller with 61 percent expecting to tackle a home improvement job, versus 56 percent in the Midwest and Northeast.
BY PROJECT POPULARITY:
Remodeling to gain more outdoor living space continues to be the number one home improvement project, with 41 percent planning such overhauls as a deck, patio, or landscape renovation—possibly for more exercise, the notion of better health, or simply to enjoy nature whether plantings or edibles. Home repairs/technology projects come in second at 32 percent, followed by bathroom updates at 28 percent, and kitchen remodels at 24 percent. If buyers or sellers ask advice about the value of pools, this survey revealed they’re less high on many lists at just 7 percent, but that number has jumped higher and may rank as more important in warmer climates. Both garages and barns have also become more desirable projects this year at 14 and 4 percent respectively across all groups.
Whether you work with a potential buyer, seller, or homeowner or fall into one of those categories, many underestimate the cost and scope of a project. It’s always smart to get a written quote and several bids, compare apples to apples. Always set aside an extra cushion for cost overruns sometimes due to existing conditions not easily visible. Ten to 15 percent of the project’s cost offers some assurance. Also, check what’s trending nationally and in each market through other surveys as the “Cost vs. Value” Report from Remodeling Magazine. For more information, visit LightStream.com/2017HomeReno.
Home Improvement Trends: What one New York City Realtor is Finding
Broker Ian Katz, founder of the Ian K. Katz Group in New York City, is a Millennial in his mid-30s and often works with clients like himself. “They’re much more concerned with where things/ materials are sourced from than other groups and want to know who’s supplying them, if the energy level is neutral, and what the technology is so they can use their apps and phones with it,” he says. If they’re buying new construction, they want the latest amenities such as cold storage for groceries since many don’t have time to shop and order online. They also want gyms and health centers in-house and even access to instructors as well as the ability to send out dry cleaning. “The less they’re required to do, the happier they are,” Katz says. How big a unit they want depends on their stage of life. If they buy as singles they’re less concerned and prefer move-in condition, or they’ll re-purpose an area for another need—maybe, carve out a home office.
When it comes to Boomers, many are couples returning to an urban center after living in the suburbs and they generally want proximity to their adult children but they also want to downsize and have less space than they did before—sometimes also because their new places are so much more costly per square footage. Katz has found they often want him to guide them in finding units with good storage or places where they can get rid of furnishings that won’t work.
Gen X’ers, he’s found, are looking more to put down roots versus the more mobile Millennials, and are willing to renovate since they’ll stay. They usually are willing to spend more and also want larger spaces.
The recent rate hike began affecting the Millennials more than others—even before it occurred since there was so much discussion about it, Katz says. “Some Millennials now debate renting longer than buying” he says. “For most others it probably won’t make a difference unless they’re borderline borrowers, which could make their pre-approval tougher.”