Two Cents - Insights Brought to you by Vectra Bank

The end of any year and the beginning of a brand new one prompts many homeowners to look back and plan for what's ahead, especially when it comes to maintenance and repair jobs around the home. While everyone's priorities are a little different, most of us generally want to target the most valuable home improvement projects that will offer returns from the time, effort and savings pumped into them.

If you're a homeowner heading into 2018 with big plans for your humble abode, you're certainly not alone. According to a report from HomeAdvisor Chief Economist Brad Hunter, American households continue to spend more each year on renovations, repairs and upgrades to their property, and this trend is expected to persist at a similar pace next year.

• In 2016, U.S. homeowners spent more than $5,100 on average on residential improvement projects, nearly $1,900 more than the 2015 average. What's more, almost two-thirds of those surveyed as part of HomeAdvisor's report said they planned to spend as much or more in 2017.
• Rising home values around the nation have boosted equity held by most American homeowners. This gives them the confidence to invest in home improvement projects either through cash savings or products like home equity loans and lines of credit.
• Baby boomers are the only generation of homeowners spending more than average on improvement projects. However, the younger millennials are notably outspending Generation X homeowners on average - with the former generation spending around $700 more per year.

Other trends discovered by HomeAdvisor researchers can help inform homeowners on where to allocate future renovation budgets. For example, the report found that improvement spending tended to be highest in households that have occupied their current residence for fewer than five years. By far the lowest level of spending ($3,800 in 2016) was from what HomeAdvisor called the "maintainers" - those homeowners who have spent between six and 10 years at their current residence.

How homeowners are spending

So what exactly are U.S. households putting this money into? According to the National Association of Home Builders, some of the most expensive projects are seeing a surge in popularity . A report based on the NAHB Remodeling Index found that in 2017, remodeling firms booking projects worth more than $25,000 were seeing faster growth than those that focused on small-scale repairs and maintenance. That includes an estimated 10 percent of American homeowners who completed a kitchen or bathroom remodel in the last year, projects that tend to cost at least $20,000 and up to $50,000. Appliance dealers and other industry leaders are also reporting higher sales on big-ticket items.

This phenomenon of big home spending isn't a surprise to most economists and analysts given the context. In the aftermath of the recession, home values fell and broad economic conditions worsened, causing homeowners to reel in discretionary spending and delay big projects. But with employment and investment markets still showing signs of continued growth, consumer confidence has risen in tandem.

Some of the most expensive home projects are getting the most attention.

In terms of estimating the next 12 months of remodeling, repair and renovation activity, economists including HomeAdvisor's Brad Hunter are cautiously optimistic. Based on surveys of U.S. homeowners, he expects per-household spending to remain about as high for the whole of 2017 as it was last year. That's because current market trends appear to signal an increase in interest rates charged on mortgages and other forms of credit over the next 12 months.

In theory, this would discourage homeowners from "trading up" into a more expensive home, and instead put savings toward repairs and improvements on the home they already have. And although only about 20 percent of homeowners last year said they used loans to cover improvement project bills, a HomeAdvisor survey found that they would not be likely to reconsider that option if interest rates moved up as much as 1 percent. That's not to mention the many tasks that need to be completed and paid for regardless, like critical electrical and plumbing work.

Homeowners who feel ready to pull the trigger on a big project next year are in good company. Be sure to perform as much research on the job as possible, including how to seek out qualified estimates from the best professionals in your area.

Talk to your local Vectra Bank professionals for more information about improving your home today! You can also complete the short form below and we'll reach out to you!

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