The home improvement boom shows few signs of slowing down. Lowe’s told shareholders Wednesday its same-store sales were up 5% in the fourth quarter. The company also raised its sales forecast for the year to $99 billion. That was after Home Depot reported an 8% increase in same-store sales the day before. One big reason for the growth: a housing stock that’s getting old.
In 2005, the median age of an owner-occupied house in this country was 31 years. It’s been climbing ever since, to about 40 years today. Why?
“Well, the fact that we’re not tearing down and building new as quickly as we might want, or as quickly as we need to, to meet the new demand,” said Grant Farnsworth, president of the Farnsworth Group, a home improvement research firm.
According to him, years of underbuilding following the mid-2000s housing crash have pushed up the overall age of the housing stock, along with demand for updating homes.
“The older the home, the more need, true need, there is to do projects such as [heating, ventilation and air conditioning], windows, efficiency, related projects, roofing,” Farnsworth said.
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Those kinds of replacement projects make up about half of home improvement spending, according to Abbe Will, who follows the industry at Harvard’s Joint Center for Housing Studies.
She projects that home improvement spending will grow 17% this year nationally, partly driven by inflation. The long-term average is about 5%.
“So, anything above 5% is strong growth. And then certainly when we’re in the 10 and 15 and 20% range, that’s, that’s incredibly strong growth,” she said. Unsustainable, even. Will expects that growth to peak this year.
Rising mortgage rates could slow down homebuying. And a lot of home improvement happens right before and right after a sale.
Even so, said Sam Khater, chief economist at Freddie Mac, the shortage of homes for sale will continue to fuel demand.
“For those that want to move but can’t find the right home, then they sort of look at their own home and say, ‘OK, well, how can I change this into, if it’s not my dream home, you know, maybe my close to dream home?’ In fact, we’ve got a neighbor, and that’s exactly what they’re doing,” Khater said.
It’s great if you can afford it, and many homeowners with rising equity and pandemic savings can. But the problem with an aging housing stock is that a lot of people can’t.