Harvard: Remodeling in 2022 Far Exceeded Previous Peak

Harvard's biennial report, Improving America’s Housing 2023, analyzes a convergence of forces that drove remodeling to $567 billion in activity last year and higher in 2023.

by Patrick OToole

CAMBRIDGE, Mass.—In what will certainly go down as one of the most consequential reports published in its 25-year history, Harvard’s Remodeling Futures Steering Committee this morning issued its biennial analysis of improvements and repairs put in place during the COVID-19 pandemic. The report is consequential not only because it covers a time frame when the underpinnings of the market shifted dramatically, but also because it successfully integrates many, if not all, of the new and changing market forces that resulted in this historic surge. Residential repairs and remodeling rose to $567 billion in 2022, the report’s authors concluded.

The impacts of working from home, school from home, rising home equity, historically low mortgage rates, and a perceptible movement of households from high-cost urban centers on the coasts to lower cost metros—all played a role in lifting remodeling to new highs, the report found. At the same time, extreme supply chain disruptions combined with surging demand to push prices for materials and services dramatically higher. The Harvard researchers say that about half of the gain in spending can be attributed to inflation.

Until now, the exact size of the surge in demand was largely unknown. But using data from a multitude of sources, primarily from the most recent American Housing Survey, researchers at the Center quantified the total value of remodeling and repair activity at $495 billion in 2021 and were further able to peg the 2022 total at $567 billion, up from $404 billion in 2019.

Source: JCHS analysis of US Department of Housing and Urban Development (HUD), American Housing Surveys; US Department of Commerce, Retail Sales of Building Materials; US Census Bureau, Surveys of Residential Alterations and Repairs (C-50); US Bureau of Economic Analysis, Detailed Fixed Asset Tables; US Bureau of Labor Statistics, Consumer Price Index: Rent of Primary Residence; and LIRA.

These totals represent the aggregate of all four components of the R&R market: owner-occupied improvements, owner-occupied maintenance, rental property improvements, and rental property maintenance. Owner-occupied improvements are, by far, the largest component, comprising well more than half of the total spend. Additionally, owner improvements represent the bulk of the growth in spending. Between 2019 and 2021, owner improvements grew at an annual rate of 24 percent. The historical rate of growth is 5 percent for the sector.

“We estimate that about half of the growth from 2019 to 2022 was due to inflation. But even so, average annual real growth (7 percent) was still well above the long-run historical average of 2-3 percent after adjusting for inflation,” said Abbe Will, associate project director of the Remodeling Futures Program. “Ultimately, the increase in average spending was also accompanied by an unprecedented rise in the number of owners doing projects and there was no one main driver of the phenomenal growth in remodeling activity, unlike during the last major boom in the mid-2000s when so much of the market was going to upper-end discretionary projects like major kitchen and bath remodels and room additions.”

Improving America’s Housing 2023 was released on March 23, 2023. SOLA Group Inc., the owner of Qualified Remodeler, is a member of the Remodeling Futures Steering Committee at Harvard’s Joint Center for Housing Studies.

One of the key drivers of home improvement activity, the age of a house, has significantly risen. The median age of owner-occupied homes reached 41 years in 2021, up from a median age of 35 in 2001. The upshot is that despite the surge in improvements to homes, a meaningful share of the housing stock remains in dire need of investment, said Carlos Martín, Project Director of the Remodeling Futures Program at the Joint Center for Housing Studies. The report also identified a gap in age and condition of the housing stock along racial and ethnic lines.

“Homes are an important source of wealth for most owners, but racial and ethnic disparities in equity gains suggest widening gaps in remodeling activity and housing adequacy,” Martin said. ” “Greater public funding for retrofits and repairs, as well as expansion of the remodeling workforce, will be vital for addressing inequities.”

Age of housing stock was just one of the drivers for the gains in spending said Will, “increased time spent at home and changing home uses and activities, like working from home; massive growth in home equity and savings; an aging housing stock in growing need of major replacements like roofing, windows, and HVAC systems; and older owners remodeling for aging-in-place safely and comfortably; millennials moving through prime ages for first-time buying and remodeling to accommodate growing families; aging homes and high energy costs incentivizing energy-efficiency retrofits; and rising number and severity of disasters and storm activity leading to increased spending to restore damaged homes.”

Key Findings

Energy-related upgrades tripled from 2001 to 2021. Spending on energy-related improvements such as roofing, windows, doors, and HVAC rose to $111 billion, which translates to 34 percent of the total market.

Spending on improvements and repairs in the owner-occupied segment grew 24 percent between 2019 and 2021 to $406 billion, up from $328 billion.

Improvements spending grew twice as fast as maintenance and repair spending. Owner-occupied improvement spending—including remodels, additions, replacements, and other activities that increase the value of a home—reached $331 billion, up 26 percent from 2019.

Repairs due to storms and disasters is on the rise. On a three-year rolling basis, real aggregate expenditures for disaster repairs to owner-occupied homes reached $20 billion in 2021, up from average annual spending of $17 billion in the 2010s and well above the $12 billion averaged in the 2000s. 

In addition to a downloadable printed report, the Joint Center for Housing Studies at Harvard also created an interactive map to pinpoint remodeling and repair spending. In addition there is an interactive chart making feature to explore the report’s underlaying data table.

Key Charts

Download a copy of the report here.


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