Overview
Industry analysis from Bernstein indicates that a sustained revival in home improvement activity will depend on a loosening of the affordability pressures that have constrained housing transactions and renovation spending. Sharp increases in mortgage rates and in home prices since the pandemic have reduced homeowner mobility and pushed many potential projects off the table, the firm says.
What would trigger a recovery?
Bernstein highlights a single, pivotal financial condition: a material decline in mortgage rates. The firm estimates that mortgage rates would need to fall to roughly 5%–5.5% to restore the economics of buying or moving for many prospective and current homeowners. Such a reduction would encourage housing transactions, which historically lead to elevated spending on renovations and larger discretionary upgrades.
Lower borrowing costs would also help reverse the current "lock-in" dynamic. A significant share of homeowners obtained exceptionally low mortgage rates during the pandemic and are reluctant to move or refinance at today's higher rates. That reluctance reduces housing turnover and in turn curbs renovation demand tied to sales and relocations.
Affordability and cost pressures
Affordability remains a central constraint. The cost of purchasing a home has risen substantially relative to household incomes, while rents have remained comparatively stable. That divergence has prompted some households to delay buying, removing a key catalyst for large-scale improvement projects often associated with home purchases or moves.
At the same time, remodeling has become more expensive. Bernstein points to higher material and labor costs as contributors to a marked increase in median project expenses, which has made discretionary projects less attractive to homeowners already facing tighter financing conditions.
Outlook
Bernstein does not foresee a rapid rebound. The firm expects a gradual recovery, with demand likely to stay subdued in the near term and only to improve as financial conditions ease and housing market activity picks up. Until mortgage rates and home price trajectories shift in ways that restore affordability and increase turnover, large-ticket renovation spending is apt to remain constrained.
Key takeaways
- Lower mortgage rates and stabilizing home prices are the primary conditions Bernstein identifies for a home improvement recovery.
- Current lock-in effects from pandemic-era low rates and elevated remodeling costs have reduced housing turnover and discouraged discretionary projects.
- The recovery is expected to be gradual rather than immediate, linked to broader financial and housing-market improvements.