Renovation Spend is Up Among First-Time Home Buyers and Millennials
First-time home buyers and millennials are spending more on home renovation projects, according to the sixth annual Houzz and Home survey. In one of the largest increases seen this year, renovators who bought their first home in 2016 spent $33,800 on average, 22% 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, 7% 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).
Over half of homeowners on Houzz (52%) are planning to begin or continue renovations in 2017, consistent with plans for 2016. Homeowners plan to spend an average of $27,300 on home renovations in 2017, a 4% 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 (those who have been in their home for 6 or more years), 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.”
The survey also revealed an uptick in credit card use to pay for renovations (23% in 2016 vs. 21% in 2015). First-time buyers are nearly twice as likely to use credit cards than long-term owners (39% vs. 21%) and three times as likely to rely on gifts (15% vs. 5%). However, cash remains king across the board, with 91% of homeowners using this payment method for part or all of their project. Loan financing continues to be uncommon, with just 11% taking out a secured bank loan to fund their projects. Of those, 71% 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%). Nearly half (47%) of first-time buyers cite this as their top challenge. Other top challenges include finding the right products and materials (32%) and finding the right service providers (29%).
Average investment in living spaces increased 11 % in 2016, compared to 2015, including living/family rooms ($5,400), dining rooms ($2,600), and guest bedrooms ($1,900). Laundry room spend is also up 24%, averaging $2,800, and master bedroom spend increased 23% ($3,400). Unlike spend on living quarters, spending 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).
In 2016, finally having the time and the financial means continue to be the top reasons why homeowners start renovations (37% and 36%, respectively). Wanting to customize a recently purchased home drives over a quarter of homeowners (27%), while just over one in ten (12%) is motivated by preparing their home for resale.
Over a quarter (28%) of homeowners consider integration of smart technology as very important to their renovation, up from 25% in 2015. This is especially true for recent homebuyers, who are more likely to prioritize integrating smart technology during renovation projects (35% for first-time buyers vs. 31% for repeat buyers and 27% for long-time homeowners). Recent buyers are also more likely to consider addressing health concerns very or extremely important (52% for first-time buyers vs.44% for repeat buyers and 37% for long-time homeowners). The integration of home automation technology also increased in 2016 relative to 2015 (21% vs. 19%). One-third (33%) of recent home buyers are investing in home automation installations compared to just 16% of long-term owners.
Rates of professional hiring continue to increase (87% in 2016 vs. 85% in 2015). Pro hiring is especially high among repeat home buyers (94%). First-time home buyers are just as likely to hire pro help as long-term homeowners (85% and 86%, 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% in 2016 vs. 44% 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.
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