Harvard University Remodeling Futures Program Director Carlos Martin joins Yahoo Finance Live to discuss home improvement and repair spending, the need for additional investments in aging homes, and the outlook for the U.S. housing sector.
JARED BLIKE: Household routines and the use of living space in homes changed drastically after the COVID-19 pandemic as people began to spend less time outside. Home improvement and repair spending soared to an estimated $567 billion last year, according to a report from Harvard’s Joint Center for Housing Studies. Despite this impressive investment, the research suggests, well, guess what? American homes will need further changes to prepare for disasters, improve energy efficiency, and meet the needs of an aging population. So here to discuss is Harvard University’s remodeling futures program director Carlos Martín. And Carlos, thank you for joining us today. Just break down here what you’re working on for us, please.
CARLOS MARTIN: Sure. Thank you. I mean, you hit the headline right now with regard to the levels of spending that occurred, particularly during the pandemic. And that passed in real terms the past boom in the mid 2000s. I think what’s most interesting out of this is really that not only did individuals spend more per project– and some of that was due to inflation– but also that the range of people, of homeowners that were doing improvements, increased. It wasn’t just the higher end, upper end market doing bathroom and kitchen remodels. It was a wide range of project particularly among middle income owners.
BRAD SMITH: And so this at a time where we’re still waiting for much more capacity to come online, especially in some urban cities, urban areas where that can start to drive down the rent costs that have absolutely skyrocketed, as there has been this intersection between people who were potential homebuyers that then moved out of that market and back into the rental market, at least temporarily, until prices started to ease and become a better environment to then start kicking the tires, or at least submitting some offers, even, on a potential home as well. And so where are you seeing some improvement there perhaps?
CARLOS MARTIN: So we’re certainly seeing improvement in terms of some of the smaller scale projects that homeowners can take on. And let me be clear. We saw drastic growth in rental improvements, as much as homeowner improvements. So across the board, there was a wide set of growth there. And part of the reality is that our homes are aging. And so because they’re aging, there’s going to be a need to do replacements. Those things are going to cost money. But in some of these cases like doing an energy efficient improvement, you’ll be saving money in the long-term. So there are also additional benefits that would come from things like that.
JARED BLIKE: And what’s the scale of some of the improvements that people are making here? We’ve seen, I remember from early in the pandemic, people got rather aggressive about them, just because the amount of time on their hands. But just wondering how that shifted over time and what the priorities are right now.
CARLOS MARTIN: Certainly. The kind of range of projects goes from typical HVAC floor, so the replacement. And so let me help define what the market is. So repairs and maintenance are things just to keep your current projects going forward. There is no real– assume no real added value to your house. Improvements is the biggest share of the market. That’s about 2/3 of the market. And that’s for rentals and for homeowners.
And among those improvements, we saw replacements. So this is replacements of whole systems, including things like HVAC, including your roof. So people invested when they were staying at home during the pandemic. They couldn’t take trips. They decided anecdotally to invest that money in their own homes. And so a lot of that money, a lot of that high headline market growth was from those kinds of replacements.
BRAD SMITH: Oh, I know I invested. Well, it wasn’t home. It was just an apartment. That’s New York for you. Harvard University’s Joint Center for Housing Studies Remodeling Futures Program director Carlos Martín, thanks for joining us this morning. We appreciate it, Carlos.