Homeowners will spend less money on renovations next year — and it could be troubling to the economy, experts suggest.
Home improvement spending is slated to decline next year by 0.3% for the first time in a decade following years of growth, according to the Leading Indicator of Remodeling Activity, which was developed by Harvard University’s Joint Center for House Studies as reported by the Wall Street Journal.
The index measured economic factors like current home sales, spending on home building materials and remodeling permits from the U.S. Census Bureau to determine the projected slump in consumer spending.
“There’s a turning point in the market … we’re heading into negative territory,” Abbe Will, associate project director for the Harvard’s Remodeling Futures Program told FOX Business, adding that there’s been between 5 to 7% growth in homeowner spending in the past 10 years.
Homeowners spending less money on renovations is also a reflection of the housing market. New home sales, which make up 11.5% of the housing market, declined 0.7% Reuters reported, and fewer people buying homes means they won't be spending money on fixing them up.
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“[Home owners] are thinking twice about how much they’re planning to spend. They’re hesitant about really investing in their home in a major way, thinking about the types of materials [they’re buying] – maybe choosing something that is not as pricey,” Will said.
And despite their national influence, reality home shows from networks like HGTV are proving to be more aspirational than realistic. Around 60% of people looking to purchase a home said they were willing to find a property that needs renovating with rising home costs making it harder to afford turn-key properties, according to a Move.com survey from April reported by Housingwire.com.
The home-and-garden cable network, known for home remodel shows like "Flip or Flop," and "Fixer Upper," targets a primarily 25 to a 54-year-old audience reaching nearly 100 million households beating out CNN in 2016 to become the third-most watched cable network behind FOX News and ESPN, Bloomberg reported at the time. But the shows don’t seem to translate to more consumer spending, particularly with declining home sales.
“They’re [home owners] excited about doing projects, but oftentimes these shows make it look so unrealistic as far as the cost of projects,” Will said. “The costs are often DIY as opposed to what you pay a contractor and everything else overhead," Will said.
Indeed, the average cost to remodel a home costs between $40,000 and $60,000, according to 2019 estimates from Remodelingcalculator.org. And homeowners spent between $5,350 and $13,670 on just a bathroom remodel while a kitchen remodel can cost between an estimated $7,520 and $25,320.
The flat growth in home improvement sales could impact stocks like Home Depot, Lowe’s and Sherwin Williams.