American homeowners poured $827 billion into home improvement projects during the two-year period ending in 2023, according to the latest U.S. Census Bureau American Housing Survey. This marks an increase of more than $200 billion compared to the previous survey period, with total projects rising by 4%. Average project costs also climbed, reflecting not only inflation in raw materials and labor, but also a shift toward professionally completed renovations.
Key Drivers of Increased Spending
Pent-up savings, high equity levels, elevated mortgage rates, and a housing market that discouraged moves contributed to the spike in home improvement spending. Many homeowners opted to enhance their existing properties rather than face higher borrowing costs to move.
Holden Lewis, a mortgage expert at NerdWallet, attributed the trend to “rate lock-in,” where homeowners remain in their current homes to avoid losing favorable mortgage rates. The trend, according to Lewis, reveals that instead of moving, we’re fixing up our homes for comfort, enjoyment, and energy efficiency—while adding value for a future sale.
Rising Costs and Project Trends
From 2021 to 2023, the average cost of a home improvement project rose from $4,800 to $6,200. Kitchen renovations topped the list of most expensive projects, averaging close to $43,000. Rising material and labor costs accounted for much of this increase, alongside a growing preference for hiring professionals.
Professional services, which cost an average of $8,100 per project, became more popular during this period, while the share of DIY projects fell from 39% to 36%. DIY projects averaged $2,700 each, highlighting the cost differential.
Generational and Funding Insights
Younger homeowners were more likely to take on DIY projects, with 62% of those under age 25 opting for a hands-on approach. This rate declined with age, reflecting both budget constraints and physical capabilities among younger homeowners.
As in previous years, most home improvement projects were funded with savings, the least expensive option for renovations. For larger projects, homeowners increasingly turned to home equity lines of credit and home equity loans. Cash-out refinancing has become less common due to higher mortgage rates.
Final Thoughts for Consideration
- DIY vs. Professional: Weigh the risks and potential costs of mistakes before committing to a DIY project. If you’re inexperienced, consulting with professionals or enlisting experienced friends can save time and money in the long run.
- Financing Options: Consider how long you’re willing to pay for a project when choosing between savings, home equity loans, or credit lines. A manageable monthly payment and long-term affordability should guide your decision.
The data underscores how homeowners are increasingly investing in their homes, driven by economic conditions and shifting preferences. With rising costs and a growing reliance on professional services, the home improvement landscape is evolving to reflect both practical and financial considerations.
Click here for more on NerdWallet’s look at home renovation trends.
