Lack of Housing Fuels a Home Renovation Boom
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What is the main topic discussed in this episode?
This is Your Money Matters from The Wall Street Journal. Welcome to Your Money Matters. I'm Charlie Turner in New York. There is a major shortage of single-family homes in the U.S. That has pushed up prices and locked many would-be homebuyers out of the market. And that's helped lead to a boom in renovations as more Americans decide to stay put and fix up their existing homes instead of trading up. Joining us is Wall Street Journal housing reporter Laura Cusisto. Laura, there is data showing that Americans are putting a record amount of money into home renovations. Isn't that right?
Yeah, it's interesting. So it's this trend that is cutting against a lot of what we're talking about in the housing market. We're talking about pretty low volumes of sales, considering population growth. We're talking about very low levels of new construction. But there's this one big bright spot, and that's home renovations.
How is the shortage of single‑family homes driving homeowners to renovate?
So Americans are expected to spend $316 billion this year on home renovations. That would be a new record. And that is... a bright spot, but it's only a partial bright spot because that is just less of an economic engine than new home construction.
Talk about rising prices. This is very interesting because on the one hand, rising prices are pricing a lot of people out of the market. And on the flip side, I guess it's given a lot of confidence to existing homeowners who are essentially investing in their house in home renovations.
Yeah, so rising prices drive home renovations in two ways. One, I would say, generally is considered a good reason, and the other is considered a less good reason. So the good reason that they're driving home renovations is because people have more cash in their homes. So either maybe they do a straight-up cash-out refi, or maybe they just have enough confidence to dip into their savings and say, you know, I'll do that $24,000 kitchen renovation because I know that my home value has gone up by, you know, $300,000 or whatever the case may be. So it gives people a real shot of confidence and gives them the sense that they can invest in their homes and get that back one day. The negative reason why it's driving it is because we're seeing a lot of examples of people looking around and saying, well, there's just nothing for me to buy.
I can't afford to buy in the same neighborhood that I've been living in. If I do buy something, it's going to be a lot smaller. And so you're seeing people say, well, you know what, maybe I'll just stay put and try to spruce up the place I've got.
From an investor point of view, it's been pretty good because I think it's driven up the stocks of companies like Home Depot and Lowe's.
Yeah, it's interesting, especially at this time when, you know, in most cases it's not that great to be a retailer right now. But this is actually a pretty good business to be in. So that's another bit of a bright spot for the U.S.
Why are Americans spending a record $316 billion on home renovations?
economy.
The renovation boom is a reflection of a broken housing market. You know, the inventory of affordable homes is so small. It's great for the renovation industry, but it's not great overall for the housing market.
It's not great for the housing market. Not only does it reflect problems in the housing market, but it exacerbates those problems. So we've already got this shortage of inventory. And then if you have people saying, I'm not going to move, I just can't be bothered, it's too stressful, I don't want to go to these open houses with 80 other people, that's just going to gum up the market even more. It's going to make it... What we're seeing a lot of is these baby boomers saying, you know what? I'm just going to age in place. I'm going to die here. They're going to take me out horizontally. And that's not good for the generations who are coming up behind them. And so I don't know what it's going to take to see this change, but it's a real problem for the market.
I'm speaking with Laura Cusisto of The Wall Street Journal. You're listening to Your Money Matters. Thanks for listening, everyone. Laura, which demographic groups are driving the renovation boom?
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:02–0:57
2
How is the shortage of single‑family homes driving homeowners to renovate?
0:57–2:47
3
Why are Americans spending a record $316 billion on home renovations?
2:47–5:20
4
In what ways do rising home prices encourage renovations versus hinder moves?
5:20–7:11
Speakers
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