The pandemic has triggered a “phenomenal demand” for renovation projects, which has increased every quarter since the end of 2020, says Will.
Last year, renovation spending rose 9% year-over-year, and it’s expected to rise 17% this year, according to Will. The historical average annual growth is around 5%. Will attributes the growth to many factors, including employees working from home, delayed projects from 2020, aging homes, the nesting of new owners and preparedness for natural disasters.
But spending may increase more slowly towards the end of the year as equity borrowing becomes a less attractive option. Home values are expected to rise steadily rather than skyrocket, meaning homeowners will not accumulate equity as quickly as before. At the same time, Will says expected Fed rate hikes will raise rates for home equity loans and lines of credit.
“Higher interest rates for homeowners who want to tap into their home equity or use other methods of financing could reduce some of that demand, which would then relieve some of that pressure,” Will said. .
How to plan your renovation this season
Neither Will nor Emrath sees any reason to put off a renovation in the hope that it will be easier or cheaper next year. In fact, Emrath says rising rates could be a signal to start a renovation sooner rather than later if you plan to fund it.