Spending on home improvement has been hovering at record levels for the past two years and is expected to remain strong throughout 2017. Affluent Americans, whose wealth has increased considerably in recent years, account for a substantial portion of the market.
Recent reports of consumer spending in 2016 indicate that, on average, affluent households spent more on home improvement last year than in previous years. Larger expenditures have become more concentrated among the wealthiest households.
Curiously, although home ownership is near an all-time low, spending on home improvement is estimated to have reached $361 billion last year, according to a new report from the Joint Center for Housing Studies at Harvard University (JCHS), up 6 percent from a record high in 2015.
Affluent households (those with annual earnings of $100,000 or more) historically have expended a disproportionate amount of those dollars. "Over the past 20 years," says JCHS, "the top 5 percent of spenders accounted for at least a third — and up to a half — of annual spending."
Surveys show that affluent households tend to spend more on home improvement than on any other discretionary category except purchasing a vehicle.
Among the top five chief leisure activities cited in a recent Ipsos affluent survey were doing home repairs (69 percent), gardening (60 percent) and home decorating (59 percent). Understandably, spending decreased precipitously following the burst of the housing bubble in 2008, but has been on an upward trajectory since 2011.
Data collected by Statista, a web portal devoted to statistical information, reveal that among affluent households in 2016, 10.2 percent spent between $25,000 or more on home improvement, and 4.7 percent spent $50,000 or more. Among those with household incomes of $200,000 or more, those figures jump to 15.1 percent and 7.4 percent, respectively. About 2 percent of affluent households spent $100,000 or more, including 3.6 percent of those with household incomes of $200,000 or more.
These levels of spending may seem relatively modest when one considers, for example, that nearly one-third (31 percent) of the respondents to Houzz’s 2016 Bathroom Study reported spending $25,000 or more for a bathroom remodel, and more than half (59 percent) of respondents to Houzz’s 2017 Kitchen Study spent $25,000 or more on a kitchen remodel.
It is worth noting, by comparison, the JCHS report states the average owner spending on home improvement in 2015, the year spending reached a record high, was less than $3,000.
As might be expected, spending levels tend to rise rapidly among the very rich. Results of a survey of the wealthiest Americans conducted periodically by the Spectrem Group reveal a decided increase in home improvement expenditures in 2016.
Participants in the study, who have a net worth of $25 million or more, spent "a great deal on home improvement," relative to households in general. "Almost half spent at least $25,000 in the last year on home improvement, and more than 25 percent spent at least $50,000," reports Spectrem. Among respondents to the same survey in 2012, just greater a third (37 percent) spent at least $25,000 on home improvement in the previous 12 months, and just 20 percent spent at least $50,000.
And for the super-rich, the sky’s the limit. A 2012 study of jet owners (with household assets of $50 million or more) conducted by market research firm Hannah Grove found participants, on average, owned two residences each worth $2 million and spent over $500,000 on home improvement.
Of course, there are much fewer of them — about 150,000 according to Spectrem. On the other hand, recent data indicates there are about 31 million affluent households, most with incomes between $100,000 and $149,000 annually. That works out roughly to 500 households for every residential interior designer, which seem like pretty good odds for future business.