Home Reno Will Drive Builder Market for 2025

Whatever happens with mortgage rates, it will be existing homeowners renovating their homes that will be the big surge next year.

The builder market may still be waiting for an expected reduction in interest rates to drive the new housing market but in the meantime, a new report is suggesting the renovation and home improvement sector will be big factors driving more activity in 2025.

A recent Wall Street Journal analysis of the business was quite positive about its outlook: “By this time next year, the annual rate of spending on home repair and renovation is expected to approach record levels. More homeowners are borrowing against the rising value of their properties, suggesting that the worst of the remodeling slump has passed.”

The Journal cited Harvard University’s Joint Center for Housing Studies – a closely watched gauge of repair and renovation spending – predicting a return to growth next summer. It said spending should reach an annual rate of $477 billion by this time next year. “That would approach the record annual rate of $487 billion reached a year ago, before high rates took a toll.”

Those high rates have put a big damper on the home improvement business, especially after the pandemic boom when homeowners poured money into repairing, renovating, and remodeling their homes. All that activity also pulled forward spending that would have otherwise been spread out over a longer period, further diminishing business.

John Burns Research & Consulting is estimating that Americans have more than $35 trillion in home equity, up 81% from the end of 2019, citing numbers from the Federal Reserve. “That is an average of about $400,000 per U.S. homeowner,” the research company said.

Matthew Saunders, senior vice president of building products research at John Burns, told the WSJ the firm recently polled 475 households that said they are waiting for lower rates to use home-equity lines of credit to fund projects. They broke down into two groups: 30-somethings planning work in the $60,000 range and older homeowners eyeing updates that will cost closer to $30,000. “We think there’s $30 billion in remodeling spending just sitting on the sidelines today, waiting to be spent.”

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