Renovation Spending Rises Among First-Time Home Buyers and Millennials
May 4, 2017
First-time home buyers and Millennials are spending more than ever on home renovation projects, according to the sixth annual Houzz & Home survey of more than 100,000 respondents in the U.S. In one of the largest increases seen this year, renovators who bought their first home in 2016 spent $33,800 on average, 22 percent more than in 2015. Baby Boomers and older generations (55+) continue to spend roughly three times more than Millennial homeowners (25-34), however Millennials invested an average of $26,200 in 2016, seven percent more than they spent in 2015. Investment in home renovation overall remains strong as homeowners spent $60,400 on average on 2016 renovations, in line with 2015 ($59,800 on average).
This year is on track to be another boom year for home renovations, with over half of homeowners on Houzz planning to begin or continue renovations in 2017 (52 percent), consistent with plans for 2016. Homeowners plan to spend an average of $27,300 on home renovations in 2017, a four percent increase from planned spend in 2016 ($26,400).
Both first time and repeat buyers are also taking on large scope projects, remodeling nearly four rooms at the same time, on average. Scope is slightly smaller for long-time homeowners,* who average 2.5 rooms during renovation and/or addition projects. Kitchens and bathrooms, which continue to command the lion’s share of renovation spend, are significantly more likely to be renovated than any other room of the home.
“Recent homebuyers drive a significant share of home renovations today, with repeat buyers investing twice as much in their home as first-time home buyers,” said Nino Sitchinava, Houzz principal economist. “Younger and cash-constrained first-time buyers are responding to the low inventory of affordable homes by purchasing properties that require more than just cosmetic upgrades. Not surprisingly, we are seeing their spend on home renovations increasing significantly in 2016 and expect this trend to continue through 2017.”
Increase in Credit Card Use
The survey revealed an uptick in credit card use to pay for renovations (23 percent in 2016 versus 21 percent in 2015). First-time buyers are nearly twice as likely to use credit cards than long-term owners (39 percent versus 21 percent, respectively) and three times as likely to rely on gifts (15 percent versus five percent, respectively). However, cash remains king across the board, with 91 percent of homeowners using this payment method for part or all of their project. Loan financing continues to be uncommon, with just 11 percent taking out a secured bank loan to fund their projects. Of those, 71 percent relied on home equity lines of credit.
Increased credit card use may be tied to the top challenge for homeowners in 2016: staying on budget (36 percent). Nearly half of first-time buyers cite this as their top challenge (47 percent). Other top challenges include finding the right products and materials (32 percent) and finding the right service providers (29 percent).
Higher Spending for Living Quarters
Average investment in living spaces increased 11 percent in 2016, compared to 2015, including living/family rooms ($5,400), dining rooms ($2,600) and guest bedrooms ($1,900). Remarkably, laundry room spend is up 24 percent, averaging $2,800, and master bedroom spend increased 23 percent ($3,400). Unlike spend on living quarters, spend on kitchens and master bathrooms remained relatively flat ($19,100 for kitchens and $11,700 for master baths, averaged across a wide range of room sizes and project scopes).
Recent Homebuyers Motivated to Customize
In 2016, finally having the time and finally having the financial means continue to be the top reasons why homeowners start renovations (37 percent and 36 percent, respectively). Wanting to customize a recently purchased home drives over a quarter of homeowners (27 percent), while just over one in ten is motivated by preparing their home for resale (12 percent).
First-Time Buyers Prioritize Smart Tech & Healthy Homes
Over a quarter of homeowners consider integration of smart technology as very important to their renovation (28 percent), up from 2015 (25 percent). This is especially true for recent homebuyers, who are more likely to prioritize integrating smart technology during renovation projects (35 percent for first-time buyers versus 31 percent for repeat buyers and 27 percent for long-time homeowners). Recent buyers are also more likely to consider addressing health concerns very or extremely important (52 percent for first-time buyers versus 44 percent for repeat home and 37 percent for long-time homeowners).
At the same time, integration of home automation technology also increased in 2016 relative to 2015 (21 percent versus 19 percent, respectively). One-third of recent home buyers are investing in home automation installations (33 percent) compared to just 16 percent of long-term owners.
Greater Reliance on Professional Help
Rates of professional hiring continue to increase (87 percent in 2016 versus 85 percent in 2015). Pro hiring is especially high among repeat home buyers (94 percent). First-time home buyers are just as likely to hire pro help as long-term homeowners (85 percent and 86 percent, respectively).
Across all renovating homeowners, the growing demand for professional help is fueled by a greater need for specialty service providers such as plumbers and painters (48 percent in 2016 versus 44 percent in 2015). In contrast, demand for project managers, full-service providers (e.g., general contractor or design-build), architects and interior designers has remained relatively stable year over year. These services are most popular among repeat home buyers.
The Houzz & Home Survey
The annual Houzz & Home survey is the largest survey of residential remodeling, building and decorating activity published. The survey covers a wide range of renovation projects in 2016, from interior remodels and additions to home systems, exterior upgrades and outdoor projects. Data gathered includes historical and planned spends, professional involvement, motivations and challenges behind building, renovation and decorating projects, as well as planned activities for 2017. The 2017 study includes more than 100,000 respondents in the U.S. alone, providing insights into the home improvement activity of the more than 40 million monthly unique users of the Houzz site and mobile apps.
The Houzz & Home Survey was sent to registered users of Houzz and fielded in February-April 2017. The Farnsworth Group, an independent market research firm, conducted the survey.