On average, homeowners will spend between 1% and 4% of their home’s value annually on regular maintenance and repairs, amounting to at least $2,000 every year. However, a new study released by Houzz shows that homeowners are spending more money than ever before when sprucing up their home — specifically, Millennials and Baby Boomers.
Instead of purchasing bigger and better homes, Millennials and Baby Boomers are spending more money than ever to renovate what they have. In a survey of over 100,000 respondents, Houzz found that Millennials invested $26,200 in their home renovation projects in 2016, which represents 7% more than they spent in 2015.
Additionally, first-time homebuyers spent even more, throwing down an additional $33,800 on renovations, plus the cost of their home.
These numbers are the highest Houzz has ever reported since they started administering these surveys six years ago. But why has this number grown so significantly in less than a decade?
The answer is simple: homeowners are focusing more on larger scope projects instead of smaller jobs here and there. On average, first-time homeowners are remodeling around four rooms at one time, when long-term homeowners generally only renovate 2.5 rooms per project. But the one factor that has stayed constant for the past six years during the survey is the fact that homeowners are much more likely to renovate their kitchens and bathrooms over any other area of the house.
“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, to Realty Biz News. “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.”
Because most Millennials and first-time buyers are trying to be frugal, the survey has noted that more of these renovations are being put on credit cards. Almost one-fourth of all remodels — 23% — were paid with lines of credit, compared to 21% in 2015. Of all homeowners, 21% of first-time Millennial homebuyers were twice as likely to pay with credit, compared to 39% of long-term homebuyers. Plus, these newbies were three times as likely to rely on gifts to furnish their homes, rather than purchase everything themselves.
This increased credit card usage adds a challenge to homeowners trying to stick to a budget. The survey found that in 2016, sticking to a budget was the hardest challenge for 47% of homeowners.
Even though remodeling may be quite expensive, there are some tips and tricks a homeowner can follow to save money in the long run. This includes choosing laminate countertops over quartz as they can last up to 20 years if properly maintained, and servicing their HVAC system every year to ensure there are no faulty components.
So at the end of the day, why are Millennial homeowners looking to spend all this extra cash on their home, when there are a lot of challenges in the way? The HomeAdvisor’s 2017 Trust Cost Report has found that there has been a two-fold rise in home equity within the past few years. Feeling that their home has extra value has increased consumer confidence in discretionary spending.
Guy Hazan, owner of a construction business in Ohio, tells Mercury News that he has noticed his business booming simply within this year alone. He believes this increase is because the positive housing market has boosted customer confidence.
“With high home prices many people can’t afford to go out and buy a new home but they can get equity lines of credit at low interest rates, so they prefer to remodel their homes,” Hazan explained. “And they feel that right now there is value in their home. Five or six years ago people weren’t feeling that way because we were in a real estate crisis.”