Home Remodeling Statistics: Trends and ROI (2022)
What is Home Remodeling?
Home remodeling is altering a home's structure or remaking one or more of its areas.
Remodeling and renovating are often used interchangeably, but there’s a difference.
Remodeling entails creating something new, while renovating means restoring something to its previous state. For example, installing a new hardwood floor is remodeling, while re-sanding the hardwood floor is renovating.
What's more, home remodeling and renovating are both referred to as home improvement. However, home improvement is a broader term that includes remodeling, renovating, repairing, restoring, modernizing, moving, demolishing, or otherwise improving or modifying the whole or any part of a residential property.
In this post, we focus mostly on home remodeling – bigger projects that add to a home’s value.
Here’s a summary of what you’ll find:
- Home Remodeling Market
- Home Remodeling Market Growth
- Home Remodeling Activity
- How Much Do People Spend on Remodeling?
- What is the Most Popular Home Improvement?
- How Much Does It Cost to Remodel a Room?
- Who Spends the Most on Home Remodeling?
- Which Home Remodeling Projects Add the Most Value?
Home Remodeling Key Stats
- Home remodeling is a $400 billion+ industry with no single company holding 5% (or more) of the total market share.
- Home remodeling's annual average growth rate is 4.4%.
- Home remodeling generated $369 billion in revenue in 2021, a 9% increase over 2020.
- Median spending on home remodeling was $18K in 2021.
- Homebuyers who recently purchased their home spent $30,000 on remodeling in 2021.
- Median spending for interior remodeling areas increased 38% form 2002 to 2021.
- A home remodeling project's average cost recovery rate (return on investment) is 56%, but some projects generate double-digit returns.
- Home remodeling is expected to reach $432 billion in 2022, a 17% increase over 2021.
- The top three home improvement projects are interior painting, bathroom remodeling, and installing smart home devices.
- Homeowners who've lived in their house longer than six years account for 60% of remodeling activity, yet spend 50% less than recent homeowners (owners who've been in their home less than one year).
Home Remodeling Market
Home remodeling projects fall into one of the three categories:
- DIY (do-it-yourself)
- With the help of a pro
- A combination of both
Depending on the scope and complexity of the project, it may also involve the services of a designer.
Thus, the home remodeling market includes wholesalers and retailers of home improvement materials and supplies, contractors, builders, and remodeling design firms.
The home remodeling market is highly competitive and has a low business share concentration. No single company in the U.S. remodeling market holds a market share of 5% (or more) of the market total.
The home remodeling market is also highly fragmented, with many players operating in different regions. High market fragmentation often results in significant price differences for projects in different geographic locations. Even project cost quotes in the same city can vary widely (think about when you requested a quote from three contractors and received three different results).
Home Remodeling Market Growth
In 2021, the U.S. home remodeling market generated $369 billion in revenue, a 9% increase over the previous year and 2x the market average annual growth of 4.4%.
Here is the home remodeling growth rate from 2017:
| Year | Revenue Growth Rate |
|---|---|
| 2017 | 6% |
| 2018 | 7% |
| 2019 | -3% |
| 2020 | 3% |
| 2021 | 9% |
According to the Harvard Joint Center for Housing Studies, the market is expected to reach $432 billion this year, a 17% increase over 2021. Beyond 2022, the home remodeling market is projected to grow at diminishing rates – getting closer to its historical annual growth.
Here’s a table showing the home remodeling revenue breakdown since 2017:
| Year | Revenue |
|---|---|
| 2017 | $313.6 billion |
| 2018 | $336.9 billion |
| 2019 | $327.0 billion |
| 2020 | $337.0 billion |
| 2021 | $369.0 billion |
Source: Harvard Joint Center for Housing Studies
The significant revenue growth in 2021 was driven by the market fundamentals – an increase in the number of home remodeling projects and increased spending per project.
Recent residential real estate market trends and the impact of the COVID-19 pandemic also played a role in boosting the home remodeling revenue.
Home Remodeling Activity
In 2021, 55% of homeowners tackled a remodeling project, a 2% increase from the previous year.
Here is a breakdown of remodeling activity over the last few years:
| Year | Remodeling Activity |
|---|---|
| 2019 | 54% |
| 2020 | 53% |
| 2021 | 55% |
Source: Houzz
The 2021 increase in remodeling activity was driven, in part, by the U.S. aging home inventory, and the record home sales, amid a significant home market price appreciation.
Faced with the record-high home prices, recent buyers (owning a home for less than one year) opted for what they could afford – older homes or/and homes in need of improvements, which drove up that cohort's remodeling activity.
Pandemic lockdowns and remote work options were also contributing factors. Having more spare time on hand and spending more time at home generated a surge in DIY projects.
How Much Do People Spend on Remodeling?
In 2021, median spending on remodeling projects grew to $18,000 which was 20% more than 2020, consistent with recent growth trends.
Here is a table of median spending growth on home remodeling since 2019:
| Year | Median Spending Growth |
|---|---|
| 2019 | 13% |
| 2020 | 15% |
| 2021 | 20% |
Note on the choice of Median vs. Average: Median spending is the halfway point – half of all projects in 2021 cost less than $18,000, and half cost more. When it comes to spending, the median numbers are often preferred to the average numbers. That is because the outliers can easily skew the average – one project costs significantly more (or less) than others.
Here’s a table showing the median spending breakdown per year:
| Year | Median Spending Amount |
|---|---|
| 2019 | $13,000 |
| 2020 | $15,000 |
| 2021 | $18,000 |
High-end remodeling projects had a big impact on the median spending increase.
In the top 90th percentile, the median spending reached $100,000, a 15% gain over 2020 and more than 2x the annual increase in previous years.
Here is a table of high-end remodeling project expenditure growth:
| Year | Spending Growth - 90th Pctl. |
|---|---|
| 2019 | 6% |
| 2020 | 6% |
| 2021 | 15% |
Total project costs, in dollars, also increased.
Here’s a table showing the median spending breakdown per year among the top 90 percentile of projects:
| Year | Spending Amount - 90th Pctl. |
|---|---|
| 2019 | $80,000 |
| 2020 | $85,000 |
| 2021 | $100,000 |
Source: Houzz
While comprising only 10% of the spending spectrum, high-budget projects contributed a large portion of the total dollar amount, driving median home remodeling spending up.
The increased spending is attributed to price increases for home improvement materials. The primary drivers were the pandemic-related material shortages, supply chain interruptions, and increased delivery costs.
What is the Most Popular Home Improvement?
Below, we show the most popular home improvements that include both remodeling and renovating projects.
Here is the popularity of home improvements ranked by the percentage of households completing a particular project.
And here is a table with the raw numbers of the percentage of households who completed a project:
| Project | Households Completing |
|---|---|
| Interior Painting | 32.2% |
| Bathroom Remodel | 27.7% |
| Installing Smart Home Device | 27.1% |
| Flooring | 26.7% |
| Landscaping | 24.7% |
| Exterior Painting | 24.2% |
| Kitchen | 23.7% |
| Fencing | 23.1% |
| New Roof | 19.4% |
| New Cabinets | 19.4% |
Here are the changes in project popularity from 2020 to 2021.
Here is a table showing the year-over-year percentage change in remodeling project popularity:
| Project | YOY Change |
|---|---|
| New Cabinets | 61% |
| Fencing | 43% |
| Installing Smart Home Device | 41% |
| Exterior Painting | 26% |
| New Roof | 20% |
| Kitchen | 5% |
| Flooring | 3% |
| Landscaping | 3% |
| Interior Painting | -7% |
| Bathroom Remodel | -9% |
Source: Houzz
How Much Does It Cost to Remodel a Room?
In 2021, kitchens were the most expensive renovation project. Home offices required the least amount of spending.
Here is a table with the median spend for home renovation projects:
| Remodeling Project | Median Spend |
|---|---|
| Kitchen | $15,000 |
| Master Bathroom | $9,000 |
| Guest Bathroom | $4,400 |
| Living/Family Room | $4,000 |
| Master Bedroom | $2,000 |
| Laundry Room | $2,000 |
| Dining Room | $1,900 |
| Guest Bedroom | $1,275 |
| Home Office | $1,200 |
| Closet | $1,000 |
In 2021, the median spending for remodeling a guest bathroom was 38% higher than the previous year. Median spending for remodeling the laundry and living room areas increased by 33%, and spending on remodeling a guest bedroom increased by 28% compared to 2020.
Here is a table with the year-over-year renovation cost increases:
| Remodeling Project | Percent Change |
|---|---|
| Guest Bathroom | 38% |
| Living/Family Room | 33% |
| Laundry Room | 33% |
| Guest Bedroom | 28% |
| Dining Room | 27% |
| Kitchen | 25% |
| Master Bathroom | 13% |
| Master Bedroom | 11% |
| Home Office | 9% |
| Closet | 9% |
Source: Houzz
Who Spends the Most on Home Remodeling?
Home remodeling activity correlates positively with the length of homeownership. It makes sense; the longer a homebuyer stays in the same house, the greater the need for improvements.
The chart below shows the share of home remodeling projects completed by the length of homeownership: long-term, short-term, and recent homebuyers (less that one year).
Here's a breakdown of those figures:
| Length of Ownership | Percentage of Projects |
|---|---|
| Long-Term (6+ yrs) | 60% |
| Short-Term (1-5 yrs) | 30% |
| Less Than 1 yr | 10% |
Interestingly, while the long-term homeowners completed more than half of the total projects, they also spent the least per project, making their contribution to the total spending the smallest. Essentially, long-term homeowners engage in more projects but ones that cost less.
Here's a table showing 2021 median spending by the length of homeownership:
| Length of Ownership | Median Spending |
|---|---|
| Long-Term (6+ yrs) | $15,000 |
| Short-Term (1-5 yrs) | $19,000 |
| Less Than 1 yr | $30,000 |
Source: Houzz
The opposite is true about recent homebuyers. Having completed just 10% of the total projects, they also spent the most per project. With the median spending of $30,000 (nearly 2x that of the other two groups), recent homebuyers contributed the most to the total home remodeling spending.
With most of the recent homebuyers opting for older homes or homes needing improvement, this makes sense, too.
Compared to the projects of more established homeowners, recent homebuyer remodeling projects were larger in size and scope (3-4 rooms instead of 1 room). They often included high price tag items (electrical systems and plumbing). Thus, these projects called for larger spending than the projects completed by the short- and long-term homebuyers.
Which Home Remodeling Projects Add the Most Value?
Homeowners undertake remodeling projects for a variety of reasons.
While improving the livability and functionality of the home was the #1 reason for remodeling in 2021, the financial considerations and return on investment weren’t too far behind.
Historically, the question of whether remodeling will increase the value of the house -- and by how much -- has been one of the top deciding factors for most home remodeling activities.
According to the National Association of Realtors, a home remodeling project's average cost recovery rate (return on investment) is 56%. Meaning for every $100 spent on the home remodeling, the homeowner will receive back $56 when they sell the house.
The average might seem low, but the good news is that some home remodeling projects result in a higher cost recovery rate, and some generate double-digit returns.
Interior Home Remodeling Projects ROI
Here’s a list of ten popular interior projects with the cost recovery rates ranging from 63% to 147%:
Hardwood floor refinishing takes the top spot with a 147% recovery rate, followed by new wood flooring with a cost recovery rate of 118%.
The table below shows the returns on investment per remodeling project. For example, every $100 spent on a hardwood floor refinish, the homeowner receives $147 back. In other words, investing a $100 in this remodeling project increases the home value (home selling price) by $147.
| Interior Remodeling Project | Return on Investment |
|---|---|
| Hardwood Flooring Refinish | 147% |
| New Wood Flooring | 118% |
| Insulation Upgrade | 100% |
| Basement Conversion to Living Area | 86% |
| Closet Renovation | 83% |
| Attic Conversion to Living Area | 75% |
| Complete Kitchen Renovation | 75% |
| Bathroom Renovation | 71% |
| Kitchen Upgrade | 67% |
| Add New Bathroom | 63% |
Exterior Home Remodeling Projects ROI
Similarly, here’s a list of eight common exterior projects with higher-than-average cost recovery:
Both new roofing and installing new garage doors have 100% cost recovery rates – the costs of these projects are recovered in full at the time of sale.
Here’s a breakdown of the return on investment for exterior projects.
| Exterior Remodeling Project | Return on Investment |
|---|---|
| New Roofing | 100% |
| Garage Door | 100% |
| Fiber Cement Siding | 86% |
| Vinyl Siding | 82% |
| Vinyl Windows | 67% |
| Wood Windows | 63% |
| Steel Front Door | 63% |
| Fiber Glass Front Door | 60% |
Source: National Association of Realtors
Conclusion
This concludes our roundup of the home remodeling.
Home remodeling was one of the few industries positively affected by the Covid-19 pandemic.
The pandemic-related surge of DIY projects generated additional home remodeling activity.
Pandemic-related supply-chain interruptions resulted in higher home remodeling materials prices and additional revenue for suppliers.
Do you think these trends will continue, even partially, or disappear?
Tell us what you think – we’d love to hear from you.
Post a Comment