Executive Summary:
As interest rates decline, spending on home improvements is expected to rebound by mid-2025, according to a forecast from Harvard University’s Joint Center for Housing Studies. Their Leading Indicator of Remodeling Activity (LIRA) predicts a modest 1.2% annual growth in home renovation and maintenance spending through the third quarter of 2025. While growth remains restrained compared to the pandemic’s boom, elevated home values and rising home equity — now at $35 trillion — make financing renovations more feasible.
This renovation revival is anticipated to benefit a wide range of industries, including hardware stores, home furnishing retailers, and manufacturers of outdoor and home appliances. Signs of recovery in home construction and rising home values are expected to further drive spending on both discretionary and essential renovations. However, challenges persist; many homeowners fast-tracked repairs and upgrades during the pandemic, while others may still face higher borrowing costs, with mortgage rates now around 6%.
A recent Clever Real Estate survey showed that 63% of homeowners prefer remodeling over moving, citing comfort, damage repair, livability, and aesthetics as the main reasons. Still, project delays and budget overruns remain common concerns. Additionally, homeowners with ultra-low mortgage rates are more inclined to renovate rather than relocate to maintain their favorable financial terms. This unique market landscape could provide steady, if moderate, growth for the remodeling sector in the coming year.
