Despite the economic downturn caused by the pandemic, home renovation spending increased 3% last year to $271 billion, according to a new report from Harvard University’s Joint Center for Housing Studies. This year, JCHS is forecasting spending will reach $281 billion.
The expected increase in renovation spending comes amid easing lockdown restrictions and increasing signs of economic recovery. Homeowners are taking advantage of savings from a year of lockdown (and perhaps cash freed up by refinancing) to improve the comfort of their homes.
“Many are finding themselves ready to adapt their homes to their new normal lifestyles,” said Nichole Straub, general manager of Discover Home Loans. “Many have reallocated their disposable income from investments in travel and entertainment into home improvement projects.”
Fifty-eight percent of people surveyed by Discover Home Loans are planning home improvement projects this year. Of those, 83% say making their home more comfortable is their key motivator.
Forty percent of homeowners surveyed by home improvement marketplace HomeAdvisor said making their home more suitable for their lifestyle was the primary reason for embarking on a renovation project, compared to 25% in 2019.
The mindset, says Mischa Fischer, chief economist at Angi, which owns HomeAdvisor, has changed to “the home isn’t just this asset that I own, it’s actually this place that has to perform all these services for me and, as a result, I’m willing to spend to get a good value on that front too.”
Choosing the right renovation project
Not all home renovation projects are created equal. According to David Haas, co-founder of PowerPay, a digital lending platform providing financing for home renovations, most renovation projects will add some value to your home. Just don’t expect to recover all of your investment.
Depending on the project, says Haas, expect to see a return on investment of between 75% and 95%. Remodels like replacing your siding with vinyl had a 75% return on investment, according to Remodeling Magazine’s 2020 Cost vs. Value report. On the other hand, replacing a garage door provided a 95% ROI.
According to Home Advisor’s State of Home Spending report, homeowners spent an average of about $13,000 on home renovation and maintenance projects last year.
The key to getting the most out of your investment, says Fischer, is finding the right balance between affordability and visual impact. Your return on investment “depends on what the buyer is willing to value that change at.”
Niche decorations or unique design features may work for you but may not be as attractive to a potential buyer, especially if it means they have to spend money on a remodel if they don’t like it. In other words, having a goth-themed home is fine if you’re the one living in it but may not make the best impression on house hunters.
Another component to any remodel will be quality. Fisher advises that getting a qualified professional to do the remodel will ensure that you get the renovation you want in a timely manner. HomeAdvisor recommends reading reviews and asking for references. If you have friends or family members who did a similar renovation project, ask about their experience with their contractor. Once you’ve narrowed your list down to a few potential candidates, check their licenses and ask to see recent examples of their work.
“With a good quality pro, you are getting a project planner, a designer, somebody who’s honest, has integrity, that’s the number one thing,” says Fisher.
Top home renovation projects for 2021
The most popular home renovation trends for 2021 are projects that don’t have to cost a lot of money but can provide a big visual impact on a home’s look and feel.
Redoing a bathroom is the most popular planned renovation project this year, according to a HomeAdvisor survey.
Let’s face it, we spend a lot of time in our bathrooms, so an upgrade that makes this important room more comfortable, efficient and practical makes a lot of sense and can be a selling point for any potential buyer. Changing tastes are going to show up first in bathrooms and kitchens. Modern toilets, faucets and showerheads are not only pleasing aesthetically but also conserve water and help to lower the operating costs of the home.
The cost of a bathroom remodel averaged $13,401 last year, according to HomeAdvisor’s True Cost Report. You could easily spend much more, but a bathroom remodel will be more economical than, say, a kitchen renovation, which averaged more than $35,000.
This was last year’s most popular project and is the second most planned project this year, according to HomeAdvisor. An interior painting project had an average cost of $2,007, a relatively inexpensive upgrade that can also make an eye-catching impact on a home.
If you’re thinking of painting with an eye to reselling your home, be careful about the colors you choose. The buyer has to be able to envision their furniture in your home, so it’s best to look for neutral tones that can blend well with any style.
The same can be said of exterior painting. If the exterior paint is failing, new paint can make your home stand out from others in the neighborhood. Just remember that if your paint upgrade is with an eye towards selling your home, you might not want to paint it in the color scheme of your favorite baseball team.
Replacing your old flooring is the third most planned renovation project this year. It is relatively economical, with an average cost of $4,680.
Replacing worn-out carpet, tile or wood with new flooring will not only make your home more comfortable but can also add a cool design feature that can make your home more attractive when it comes time to sell.
Consider the recent trends in flooring when you go to replace your old one to see what’s not only more durable but also what may enhance your home’s value. According to Realtor.com, in 2019 homes that had hardwood floors sold for 2.5% more than homes with other types of flooring and provided an ROI of between 70% and 80%.