Homeowners are investing larger budgets into their kitchen and bathroom renovation projects, according to the fifth annual Houzz & Home survey of more than 120,000 respondents in the U.S. The average spend on kitchen and master bath remodeling projects in 2015 increased by 12 percent year over year. Consistent with the last five years, kitchens remain the most popular interior remodeling project (31 percent), followed by master/non-master bathrooms (22 and 26 percent, respectively) and living/family rooms (23 percent). Renovating homeowners also tackled a more diverse set of projects in 2015 than in 2014, with a greater emphasis on upgrades to interior spaces (72 percent versus 69 percent) and exterior features like windows and roofing (56 percent versus 53 percent).
When it comes to the motivations behind renovations, finally having the time was the top trigger for home renovation projects in 2015 (38 percent), ahead of finally having the financial means (37 percent), the top trigger for 2014 projects. Homeowners are renovating instead of buying a “perfect” home largely due to their desire to stay in their current home or lot (49 percent) or remain in their current neighborhood (31 percent). Financial considerations such as renovation being a more affordable option or providing a better return on investment (28 percent each) trail behind.
The most recent AudienceSCAN survey found 6.1% of U.S. adults intend to pay for home remodeling or a new addition in the next 12 months.
Recent Home Buyers – A Key Driver of Renovation Activity
Over a quarter of renovations are driven by recent home purchases (26 percent), and more than one in ten renovators purchased a home in 2015 (12 percent). Renovators of a recently purchased home invest more in their projects than other homeowners ($66,600 versus $59,800). They also embark on larger scope projects, and are nearly three times as likely to renovate all of their interior spaces than the average renovator (14 percent versus five percent). When considering priorities, kitchen projects top the list for these homeowners (41 percent versus 31 percent for the average renovating homeowner) along with other major projects to improve the comfort of their home such as home automation (33 percent versus 19 percent). People tend to buy a home with the intention of renovating versus seeking an already “perfect” home, with the goals of creating a personalized space (34 percent), capitalizing on the affordability of renovating versus buying a home (32 percent), or maximizing their return on investment (32 percent).
Those preparing to sell their home (13 percent of renovators) are also investing in renovations, focusing on exterior projects that enhance curb appeal. Popular projects include upgrades to exterior paint, roofing, exterior doors and decks (27, 20, 19, and 17 percent, respectively). Homeowners preparing their home for sale spend just over half the amount that recent home buyers invest in their projects ($36,300 versus $66,600), prioritizing immediate return on investment and rapid sale.
“2015 was another strong year for the home renovation market, with homeowners continuing to increase investment in their homes," said Nino Sitchinava, principal economist at Houzz. “While the majority of renovations are spurred by homeowners’ desire to upgrade a home they have lived in for some time, recent home purchases are also an important driver of home renovation activity. Recent home buyers tend to do more, spend more, and are more likely to hire professionals to help with their renovation projects than other homeowners. As the churn in the housing market picks up in the near future, the home renovation market should see meaningful growth.”
Homeowners looking for their second homes could provide fruitful targets to remodelers. The latest AudienceSCAN survey found 11.2% of Major Home Remodeling Project Starters plan to purchase investment properties in the next 12 months.
Personal Finances Fund Most Renovations
When it comes to financing, the majority of homeowners continue to use personal savings/finances to fund their renovations (82 percent), followed by credit cards (21 percent). Millennials are most likely to pay for their renovations with a credit card (32 percent), and Baby Boomers are least likely (17 percent). While home equity lines of credit are the biggest form of debt financing, fewer than one in ten renovating homeowners leverage this option to fund their projects (eight percent).
Banks can target Remodeling Project Starters and advertise their home equity lines of credit! Internet banner ads could be the way to their wallets: 61% of Project Starters took action after seeing banner ads in the past year, according to AudienceSCAN research.
Budget? What Budget?
Nearly one-third of homeowners take on a remodeling project without setting a budget, and the same share exceed their established budget (31 percent each). Homeowners who exceed their budgets spend considerably more on their projects ($83,400 average spend) than those who stayed on budget ($52,300). Surprisingly, those who did not set an initial budget spent less, on average, than those who stayed on budget ($44,100). Renovators of a recently purchased home are significantly less likely to embark on a project without a budget (24 percent), yet are much more likely to exceed an established budget (40 percent). The decision to opt for more upscale products and materials was the top budget buster (45 percent), ahead of products/services being more costly than expected (40 percent) and the decision to change the project scope/design (33 percent), further signaling a high level of consumer confidence.
Remodelers can emphasize the importance of setting a budget and tout their budget-planning services in TV spots. The most recent AudienceSCAN survey revealed 49% of Project Starters took action after seeing a commercial in the past month.
Millennial homeowners continue to be just as active as other age groups when it comes to remodeling their homes (61 percent for Millennials and other age groups alike), and an even greater percentage are decorating (77 percent versus 65 percent across age groups). However, Baby Boomers and others over the age of 55 spend three times more on renovations than Millennials ($73,300 versus $24,500, respectively). While one in five renovating homeowners upgrades or installs a home automation system (19 percent), Millennial homeowners (26 percent) and recent home buyers (33 percent) are even more avid about home technology.
Remodeling firms can tout tech in newspaper (print, online, mobile or tablet) ads. The AudienceSCAN survey reported 39% of Home Remodeling Project Starters took action after seeing ads in their local papers.
A Helping Hand
More than four in five homeowners renovated their homes with professional help in 2015 (85 percent), a percentage consistent with our 2014 findings. Baby Boomers and recent home buyers are more likely than any other groups to hire professional help (88 percent and 91 percent respectively). Among those homeowners who hire a professional for their renovations, nearly half hire a professional remodeler, such as general contractor, builder, kitchen or bath remodeler or a design-build company (46%). One-fifth hire a design professional such as an architect, interior designer or kitchen or bath designer. Recent home buyers are particularly keen on hiring these professionals.