The Consumer Price Index (CPI) is the most widely used measure to track inflation, broadly tracking average prices paid by consumers for goods and services. In December 2022, the CPI fell for the first time since May 2020. However, prices still remain significantly elevated compared to a year ago. Data from the Bureau of Labor Statistics (BLS) shows that consumer prices increased by 6.5% from December 2021 to December 2022.
Within the home services industry, home improvement and household furnishing prices climbed even faster than non-household goods. According to the BLS, household furnishings and supplies rose by 7.3% over the same period, with some categories seeing even larger price spikes. For example, the price of floor coverings rose 12.5% while tools, hardware, and supplies increased 13.8%.
This leads to the question: How are homeowners reacting to these price surges? In this study, Today’s Homeowner surveyed nearly 3,700 American homeowners to get a better sense of how inflation (including the higher costs of material and labor) is affecting their home improvement plans. We asked homeowners roughly 10 questions on their home improvement plans for 2023, along with how they plan to pay for projects and manage rising costs. For more details on how we collected and analyzed the data, check out our Methodology section.
- More than half of homeowners are adjusting their home improvement planned spending due to the economic climate.
- Nine in 10 homeowners have home improvement projects planned for 2023.
- With high interest rates, homeowners are hesitant to borrow money for home improvement projects.
- To manage rising costs, homeowners–especially Generation Z and millennials–are leaning toward DIY.
Adjusting Home Improvement Spending
With inflation and the recessionary climate, many homeowners are reducing their home improvement spending. About 28% and 22% of homeowners say that in 2023, and relative to last year, they are spending either significantly and slightly less on home improvements, respectively.
Another 33% of homeowners are neutral when it comes to current economic realities, while less than 17% report that the state of the economy is having no impact on their home improvement spending.
In some states, residents are adjusting their spending more than others. In four states (Connecticut, Wisconsin, New Mexico, and Nebraska), 60% or more of respondents cited that they plan to reduce their spending on home improvement projects in 2023. This figure is largest in Connecticut at nearly 72%.
Meanwhile, in Vermont and the District of Columbia, less than 40% of survey respondents plan to reduce their spending. Several other less populated states also show up in the 10 states where the fewest homeowners are reducing their spending. They include Delaware, South Dakota, and Wyoming–all of which also have populations less than one million people.
Home Improvement Plans for 2023
Despite this reduced spending, our data shows that more than nine in 10 homeowners plan to take on at least one home renovation in 2023. Most homeowners expect to complete one or two home improvement projects this year. Specifically, about 29% of respondents plan to tackle one home improvement project, while nearly 38% expect to take on two.
On the two ends of the spectrum, less than 12% of homeowners have no home improvement projects planned for 2023. Meanwhile, only about 9% have four or more projects on the docket for this year.
Through these projects, many homeowners are generally looking to improve their living space. Nearly 69% of respondents list this as a primary reason for wanting to complete their planned home improvement projects in 2023. The next-most popular reason for wanting to complete one or more renovations is to fix something broken (53.1% of respondents).
Despite incentives in the Inflation Reduction Act of 2022 to make homes more energy-efficient to reduce costs and transition to cleaner energy sources, less than one in four homeowners list making their space more eco-friendly as one of the main reasons for completing renovations.
Similarly, whether due to a softening housing market or secondary effects of high interest rates, homeowners are less keen on completing renovations before a home sale. Only about 13% of homeowners list renovations prior to listing a home for sale as one of their primary reasons for taking on improvement projects. Of 2.5% respondents that listed other, popular reasons include modernizing and better utilizing their space.
Paying for Home Improvements
Most homeowners who have planned home improvement projects in 2023 expect to pay for them using money from checking and savings accounts (60.3%). Additionally, 37.4% of homeowners cite credit cards as one of the ways they will pay for improvement projects.
Fewer homeowners expect to turn to financing options, and of those, a majority report home equity (8.6%) and personal loans (8.5%) as their preferred choices.
Due to volatile and elevated mortgage rates, fewer homeowners are interested in a home equity line of credit (HELOC) or cash-out refinancing as ways to fund their home improvement. In a HELOC, interest rates are generally variable, meaning that homeowners may be on the hook to pay a higher rate if interest rates continue to rise. Meanwhile, a cash-out refinance is only beneficial when current mortgage rates are lower than the existing rate, which may not be the case for many homeowners today.
Managing Rising Costs
One primary way to manage costs when it comes to home improvement is by doing it yourself (DIY) rather than hiring a contractor. And, in fact, about 71% of homeowners say that inflation has caused them to do a project themselves rather than hire a professional.
This trend is especially true among younger homeowners. Roughly 76% of homeowners between the ages of 18 and 24 are doing a project themselves rather than hiring a contractor due to inflation. That figure is nearly nine percentage points lower for homeowners 55 and older.
Additionally, homeowners in more remote areas seem to prefer DIY, perhaps indicating a difficulty in finding nearby professionals. Eight of the top 10 states with the most DIY-leaning homeowners in this study have a population of five million or less. The two expectations are Tennessee and Wisconsin, both of which have populations of seven million or less.
Beyond higher costs of material and labor, interest rates are relatively high, with the average 30-year fixed-rate mortgage in January 2023 clocking in above 6%. Not surprisingly, a low percentage of homeowners expect to take out a loan for their home improvement, recognizing the high cost of borrowing money. Roughly 74% of homeowners in our survey say that heightened interest rates have made them more likely to avoid financing and loan options, instead preferring to pay for the project outright or postpone it to a later date.
About 51% of homeowners expect to postpone projects to 2024, citing cost as the biggest driver leading to their decision. More than one in 10 homeowners postponing projects also note material back orders that have continued into the new year as a factor.
Today’s Homeowner surveyed roughly 3,700 American homeowners using a third-party platform to better understand their home improvement plans for 2023. Survey data for this report was collected in January 2023.