Interest rates have been a hot topic of conversation across the country with existing homeowners, prospective buyers, and businesses whose work is affected by the trends in the real estate industry. Economic conditions remain somewhat unpredictable to most since the onset of the pandemic, leaving fewer people likely to take the leap on the high interest rates associated with buying a home since they’re unsure if the pay-off will be there in the future on such a large investment.

With existing homeowners being less mobile and likely to buy again today, home renovation projects have grown in popularity to give people the “new home” feel they’re still craving–just without the same massive price tag. In this article, we’ll look at the impacts rising interest rates have had on home buying, how they have changed and shaped the home improvement industry into what it is today, and how you can leverage this for yourself.

The Perfect Storm High Interest Rates Have Created

In the early days of the pandemic, the housing market saw itself come to a standstill overnight, along with the rest of the world. In order to keep the housing industry and businesses alive, record-low interest rates were the solution. However, this temporary event quickly faded as the pandemic progressed and lockdowns were lifted, resulting in the interest rate hikes we’re seeing across the country today. Now, current homeowners and previously prospective buyers have changed their tune since 2020 and adopted new perspectives the housing market is scrambling to offset.

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Record-High Prices

Amid a decades-long boom in the real estate industry, the average price of homes has skyrocketed across the nation, especially when compared to their prices just 10, 15, and 20 years ago. While the average price of a home was $145,500 in Q3 of 1990, inflation and a number of other factors have increased that figure to $552,600 in Q4 of 2022, resulting in an increase of over 379% in just 32 years.

If this average home price had been accompanied by a similar increase in the average wages, we would be looking at a different state in the housing market, but during that same time period, the minimum wage has only increased from $3.80 to an average of $9.78. Across metropolitan areas the U.S., the average home price has increased even further, leaving less with the ability to purchase a home.

Less Interested Home Buyers

As a result of home price hikes across the board, less of the general public is able to afford and interested in purchasing real estate, especially when we look at the younger Millennials, Gen Z, and even Gen X populations. In contrast to previous generations being heavily invested in buying homes earlier in their lives, more people are now accepting that long-term renting without the opportunity to buy a home is the new norm.

Regardless of generation or economic status, the idea of a looming recession has also encouraged potential buyers to “wait it out” and hold off on purchasing as they wait for the housing market and financial state of the country to stabilize. Hopeful new homeowners are accepting the idea of signing on their first home later in life than their parents and grandparents, leaving the market to “hurry up and wait” on these more cautious future buyers.

Decreased Inventory

With fewer and fewer interested buyers coming into the housing market each year, more current homeowners are choosing to stay where they are, instead of listing their homes for sale and making the move to a new location. On the other hand, not all individuals, couples, and families that have the means to buy a home are choosing to because of the sky-high interest rates they would face with a new mortgage.

However, as most housing markets continue to see a steady increase in inventory thanks to new home builds and multi-family housing units, we can expect to see shifts in home buying over the next few decades as the housing industry works to adapt to a new generation of buyers – or lack thereof.

The Current Rise in Home Renovations

With more and more homeowners choosing to stay where they are rather than buying a new, home renovation projects have become the alternative solution to give people the newer, bigger spaces they still want. According to the U.S. Houzz & Home Study, over half of the country’s homeowners today have home improvement projects planned for the upcoming year; in contrast to the slowing trend of new mortgages, it’s clear where current homeowners are focusing for the foreseeable future.

Homeowners Want the New Home Feel, Without the Price Tag

You’d be hard-pressed to find someone that didn’t enjoy the atmosphere of a new home. However, as fewer homeowners of all generations–especially Baby Boomers–are showing interest in rejoining the home buying market, it’s becoming increasingly common that home renovations are the solution being chosen to produce the new interiors homeowners are craving today. While this is partly because of the high interest rates associated with new mortgages, it’s also likely that many don’t want to go through the search, signing, and relocation processes associated with finding a new home.

Home Equity Loans are Trending

Thanks to the recent decades-long boom in the housing market, homeowners everywhere have found themselves sitting on record-breaking levels of home equity. While this would prove useful if they chose to sell, more people are choosing to instead leverage this equity in the form of home equity loans and home equity lines of credit (HELOC) as they stay in their current homes and opt for renovation projects instead.

When a homeowner chooses to borrow using the equity of their home as collateral, they can take on a number of home improvement projects, depending on the amount of equity and the unique wants and needs of those that own and/or live in the home. While the interest rates of these loans tend to be higher than the average interest on a new mortgage, these are still a more accessible option for those choosing not to enter the home market again.

Kitchen & Bathroom Remodeling are Top Priority

According to the U.S. Houzz & Home Study, kitchens and bathrooms have remained the most popular space homeowners chose to renovate back in 2022, with 28% of renovation projects being in the kitchen and 25% in bathrooms. As homes continue to age, homeowners are putting their kitchens and bathrooms at the top of their home project list, with everything from cabinets and finishes being a few of the most popular updates homeowners are making first.

The budgets that individuals and families are choosing to dedicate to these upgrades vary greatly across demographics and regions within the country, but even those with lighter wallets are choosing to update these high-traffic areas. Whether these home improvement projects are being taken as DIY tasks or are being delegated out to contractors, homeowners are seeing the value of these renovations as they continue to live in their current homes.

Leverage Home Renovation Trends with a New Business Opportunity

While much of the real estate industry is feeling the pressure, those in the home improvement business have thrived under this recent shift in the housing market. Savvy entrepreneurs and business-minded individuals everywhere are recognizing the need for home services and products in the home project space, leading to new, untapped business opportunities across the country. At Cabinet IQ, our founder recognized the fast-growing interest in home improvement and is ready to give you the home services franchise opportunity to help you leverage the same to grow a business of your own.

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Join the Home Renovation Industry with Cabinet IQ

Cabinet IQ is the high-tech home services franchise that helps take ugly or poorly arranged and assembled spaces and transform them into beautiful, functional interiors through full-service cabinet and countertop design and installation. Our founder, Michael Hartel, desired a simplified kitchen and bathroom remodeling process, and from this passion, our profitable home services franchise was born. With our accessible initial financial investment and minimal industry experience needed to start, Cabinet IQ is a ground-floor business opportunity for those looking to capitalize on the growing home renovation market and begin building their wealth through franchise ownership.

As the real estate industry continues to grow and change to adapt to rising interest rates and the new generations of buyers, it’s clear that home renovation projects are becoming more commonplace as homeowners deepen their existing roots. Even if interest rates and home prices go down, home improvement will continue to be a mainstay, as it demonstrated during the Covid-19 pandemic. So, how are you going to take advantage of this lucrative business opportunity for yourself?

Whether you’re eager to capitalize on the growing home renovation industry or you’re looking to build something that gives you the financial freedom you’re not getting with your 9-5, Cabinet IQ has the affordable buy-in and thriving business model built for you. Learn more about the Cabinet IQ home services franchise opportunities in your territory before it’s gone. Complete our form to get started today.

Published On: June 20th, 2023 / Categories: Design, Featured, News, Trending /