Home renovation spending reached a record $450 billion in 2023, a staggering sum poured into an aging housing stock where the median home is now 40 years old. This investment, confirmed by the Harvard JCHS Remodeling Futures Program, reveals a market intensely focused on maintaining existing properties, driven by the increasing age of US homes.

The US desperately needs more housing units to address affordability, but the market is heavily skewed towards renovating existing, often older, homes rather than building new ones. This tension creates a significant challenge for aspiring homeowners.

The current renovation boom, driven by an aging housing stock and high new construction costs, will likely continue to inflate existing home values and construction expenses, further widening the affordability gap for new buyers.

The Shifting Landscape of US Housing

New home construction starts were down 10% in 2023, according to the National Association of Home Builders. This reduction in new supply coincides with elevated mortgage interest rates, a Federal Reserve observation that actively deters new home purchases. Concurrently, the number of available existing homes for sale is near historic lows, according to the National Association of Realtors. This triple squeeze — less new supply, fewer existing options, and higher borrowing costs — compels homeowners towards renovating their current properties. The median price of a newly constructed home was 20% higher than an existing home in 2023, according to the US Census Bureau, effectively pricing many buyers out of new builds from the outset. Further complicating matters, local zoning regulations often make it difficult and costly to build higher-density, affordable housing, according to the Brookings Institution. These factors collectively redirect consumer focus from new acquisitions to improving existing homes, effectively forcing homeowners into a renovation cycle rather than facilitating new homeownership.

The Renovation Boom in Numbers

  • 30% — The cost of building materials had increased by 30% since 2020, according to the Associated General Contractors of America.
  • 15% — Permits for major home additions and alterations rose by 15% in 2023, according to the US Department of Housing and Urban Development.
  • $30,000 — The average cost of a kitchen renovation was $30,000, up 20% from five years ago, according to Houzz.
  • Home renovation projects frequently face extended timelines due to persistent labor and material shortages.