There is no denying that the housing market has had a successful year overall. However, the high demand for homes combined with sellers' hesitation to put their homes on the market has caused inventories to run low.
An uncertain economy and global pandemic are likely key reasons why many Americans are opting to invest in remodeling existing homes rather than building new ones or moving altogether. According to a new report from BuildFax, maintenance spend soared in November.
Last month, maintenance spend skyrocketed by 31.85% year over year. Meanwhile, maintenance volume increased by 5.43% year over year in November. Remodel volume and spend, which is a subset of maintenance that includes renovations, additions, and alterations, also increased by 6.38% and 7.60% compared to November 2019, respectively.
The report explains that “prices for building materials have soared due to strong homebuilder and remodeler demand” during the COVID-19 pandemic. This is likely one reason that many Americans are opting to invest in maintaining and remodeling their homes rather than purchasing new ones.
“Maintenance spend surged in November to the largest year-over-year increase we’ve ever seen,” said Jonathan Kanarek, Managing Director of BuildFax, a Verisk business. “While the rising costs of building materials play a strong factor, investment in the existing housing stock has increased amid the pandemic as Americans spend significantly more time at home and focus on home improvements. Additionally, rising home prices due to tight supply has propelled homeowners to reinvest in their existing homes instead of re-entering the market.”
It is more affordable for many to invest in the properties they currently have than to put money toward a new home. Another reason that could be driving the increased maintenance and remodeling of homes is the competitive buying market. The current market is highly competitive and could make it difficult to relocate to another home.
However, there was an increase in new constructions of single-family homes in November. Single-family housing authorizations increased by 9.14% from last year, and 4.46% from October 2020. According to BuildFax, “homebuilder confidence reached another record high in November.”
Despite the increase in new home constructions, affordability is still an issue across the country. The nation’s housing shortage, rising construction costs, and the potential increase in mortgage rates next year could all cause more Americans to be cautious with how much the spend on maintaining and building homes.