The pandemic triggered “phenomenal demand” for remodeling projects, which has increased each quarter since the end of 2020, Will says.
Last year, remodeling spending rose 9% year over year, and it’s projected to rise 17% this year, according to Will. Historical average annual growth is about 5%. Will attributes the growth to many factors, including employees working from home, delayed projects from 2020, aging homes, nesting new homeowners and natural disaster preparation.
But spending could grow more slowly toward the end of the year as borrowing against equity becomes a less attractive option. Home values are expected to steadily rise, rather than skyrocket, meaning homeowners won’t accrue equity as quickly as they did before. At the same time, Will says the Fed’s expected rate hikes will raise rates on home equity loans and lines of credit.
“Higher interest rates for homeowners who are interested in tapping their home equity or using other financing methods could cut back on some of that demand, which then relieves some of this pressure,” Will says.
How to plan your remodel this season
Neither Will nor Emrath sees a reason to delay a renovation in hopes that it will be easier or cheaper next year. In fact, Emrath says rising rates could be a signal to start a remodel sooner than later if you plan to finance it.