Home improvement is a popular pastime that can add value to your home and improve its livability. But it can also be a costly endeavor, so homeowners should carefully consider their plans and budget before diving in.
While American homeowners have spent billions on home improvements in recent years, the pace of this spending has slowed as households watch their finances amid rising prices and concerns about an impending recession. Contractors and retailers that depend on this spending say they are seeing households pause on bigger projects in favor of cheaper do-it-yourself fixes. The nation’s two largest home improvement retailers reported this week that customers have shifted their focus to painting and replacing light fixtures, instead of converting bathtubs into showers or refinishing hardwood floors.
A recent NerdWallet survey found that about half of all Americans plan to make at least one home improvement this year. Many of these are smaller projects, such as painting rooms and updating light fixtures. But some are larger, such as extending living space with an addition or adding a new bathroom. The results show that Americans’ priorities are shifting toward home comfort and safety.
The most common home improvements are those that address a particular problem or issue, such as installing a security system or upgrading the kitchen. Other popular options include adding a deck, installing new windows or doors, and refinishing wood flooring. These projects are often easier and less expensive to complete than a major renovation like replacing an entire bathroom or adding a bedroom.
More than half of the homeowners who completed home improvement projects in 2021 said they were able to pay for them without tapping into savings or going into debt, according to the Census Bureau’s latest American Housing Survey. But about 20% had to sacrifice other purchases or make other financial sacrifices to afford the work, and 14% tapped into their emergency savings or took out a loan.
Many homeowners find themselves relying on online and app-based services to hire contractors for more costly home improvement projects. These aggregators match consumers with contractors based on their location and project requirements. They also offer customer reviews and a variety of financing options, including credit cards, personal loans, home equity lines of credit (HELOCs) and second mortgages.
While these aggregators can be helpful, it’s important for homeowners to check the contractor’s license and insurance status before hiring them. They should also request a detailed contract with a clear timeline for the work and specify all project details, such as what materials will be used.
Despite slowing home improvement spending, some experts expect that consumers will return to pricier projects later this year. “There is pent-up demand that will bring opportunity for spending on larger home improvement projects as the economy recovers,” says Joe Derochowski, a home industry adviser at market data company Circana. He suggests that homeowners consider a home renovation loan, which offers a fixed rate and a repayment term over a set period of time.