Drop in home improvement efforts frees up cash
Rachael Westgate WEALTH OF GEEKS
The high volume of home renovations undertaken during the pandemic may finally have peaked, as Home Depot announces 2023 sales may decline as much as 7 percent to 13 percent — its first drop in sales in nearly 15 years.
This dip, paired with the findings of a recent study on home improvement investments across America, indicates that folks on the East Coast, in particular, are stepping back from renovations in hopes of keeping more cash liquid during this inflation era.
A new study conducted by Contractor Growth Network assesses state home improvement spending between December 2021 and December 2022. Its findings reveal that most expenditures were on the east side of the United States.
Home improvement
sales down
According to Home Depot’s August news release, sales are down 2 percent from last year, reflecting a total sales of $42.9 billion in the second quarter of 2023. This shift is significant, marking a regression from the three-year sales growth they saw in and around the COVID-19 pandemic.
Rising mortgage rates suggest that individuals unable to shoulder a new
mortgage may be taking on the renovation of their current home instead, but the data shows this isn’t the case. This information from the world’s largest home improvement retailer may instead indicate a shift away from do-ityourself home upgrades in recent months.
When assessed alongside new research on states stating that homeowners spent the most on home improvements in 2022, it is clear that residents along the country’s
U.S. mortgage rate reaches highest point in nearly 23 years, hitting 7.31 percent
ASSOCIATED PRESS
LOS ANGELES — Home loan
borrowing costs climbed again this week, pushing the average long-term U.S. mortgage rate to its highest level in nearly 23 years, another blow to prospective homebuyers facing an increasingly unaffordable housing market.
The average rate on the benchmark 30-year home loan rose to 7.31 percent, from 7.19 percent last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.70 percent.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loan, also increased.
The average rate rose to 6.72 percent from 6.54 percent last week.
A year ago, it averaged 5.96 percent, Freddie Mac said.
“The 30-year fixed-rate mortgage has hit the highest level since the year 2000,” said Sam Khater, Freddie Mac’s chief economist. “However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds are causing both buyers and sellers to hold out for better circumstances.”
High rates can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already out of reach for many Americans. They also discourage homeowners who locked in rock-bottom rates two years ago from selling.
eastern side stand to save the most money by stepping back from home improvement projects. States that spent the most last year Contractor Growth Network’s study assessed information from Consensus Business Builder and Statista, looking at median household income versus average home improvements to identify the states that spent the most money on renovations from December 2021 to
December 2022.
Topping the list is New Jersey, followed by Maryland, Massachusetts, Connecticut, and Hawai‘i, with California, Virginia, New Hampshire, Washington, and Colorado rounding out the top 10 list. New Jersey is first on the list, with an estimated annual spend of $4,634 on renovations, equaling 5.1 percent of residents’ median household income of $89,703.
In second place, Maryland sees 4.9 percent of funds allocated to home
improvements, with $4,516 out of $91,431 in income committed to renovations.
Third place goes to Massachusetts, where the population of 6.95 million residents spends $4,473 out of $89,026 on home beautification and updates.
Connecticut comes fourth, at $4,356 on average for its 3.61 million residents. This spending reflects 5.2 percent of the median household income of $83,572.
Hawai‘i follows in fifth place, with a total population of 1.442 million, spending an average of $4,279 annually on home improvements. The median household income of $93,547 means that residents dedicate 4.8 percent of their yearly income to this spending category.
Sixth, with a population of 39.24 million, is California. These West Coast households spend an estimated $4,268 on yearly home improvements, 5 percent of the $84,097 median income.
Virginia comes in seventh place, spending 5.2 percent of the median income ($80,615) on home improvements for a total of $4,215 per year.
New Hampshire, home to 1.389 million people, ranks eighth for spending the most on home improvements. The median household income in New Hampshire is $83,449, and households spend $4,145,
or 4.9 percent, on home makeovers each year.
Ninth place goes to Washington, where households spend $4,076 on yearly home improvements. This is 4.9 percent of the median household income, $82,400.
Rounding out the top 10 is the state of Colorado. With a population of 5.812 million, this state has a median household income of $80,184, and 4.8 percent of this income is dedicated to home improvements, totaling $3,929 annually.
A spokesperson at Contractor Growth Network comments on the geographic spread: “It’s interesting that New Jersey, Maryland, Massachusetts, and Connecticut dominate the top four, suggesting that home makeovers are more popular on the East Coast.”
Freeing up capital
It’s difficult to predict how the drop in Home Depot sales may affect these figures for the 2022-23 year. This marked shift in demand for home improvement supplies may mean Americans are holding on more tightly to their money. These variable expenses are likely the first to go for individuals looking to set aside more cash in the coming months.
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This post was produced by Mama Say What?! and syndicated by Wealth of Geeks.
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