Private spending on home improvements

Private spending on home improvements is projected to reach $282.7 billion in 2026, representing a slight downturn of 0.5% from 2025. While the first two quarters of 2025 showed strong growth in private spending on home improvements, the impact of the Trump administration's tariffs on costs significantly constrained investment in the latter half. These pressures are set to remain a headwind to home improvement through 2026, especially as products like sawmill lumber remain subject to tariffs even after the Supreme Court's decision on IEEPA tariffs.

Despite a muddled outlook for the current year, private spending on home improvements has moderately climbed through the current period. The expansion reflects renewed homeowner investment in residential properties as housing market conditions stabilize and accumulated home equity provides financing capacity for major renovation projects. Rising home values continue supporting borrowing ability through home equity lines of credit and cash-out refinancing options, enabling homeowners to fund substantial improvement initiatives. Energy efficiency upgrades have gained particular prominence, driven by government tax incentives and utility rebate programs that reduce upfront costs for HVAC system replacements, insulation improvements, and solar panel installations. Kitchen and bathroom remodeling projects remain dominant spending categories, as homeowners prioritize high-impact renovations that enhance both functionality and property values. However, elevated material costs and labor shortages continue constraining project scope and timelines, forcing many homeowners to delay or scale back improvement plans despite strong underlying demand for renovation services.

Home improvement spending in the early period was defined by wake of 2020's boom. Quarantine orders pulled forward significant demand for home improvements, leaving 2021 and 2022 both as years of declining spending after a pre-period spike. These two years also were rife with supply chain disruptions and material cost inflation that constrained project feasibility, forcing many homeowners to postpone planned renovations until market conditions improved. Spending began to rise again in 2023 before recovering strongly in 2024 with solid 6.2% year-over-year growth to $273.3 billion. This resurgence reflected improved material availability, moderated cost inflation and renewed homeowner confidence supported by continued home value appreciation and accumulated household savings. This trend persisted through much of 2025, though high input costs weighed on spending and led to lessened growth compared to 2024.

The composition of home improvement spending has evolved significantly during this period, with energy efficiency and smart home technology projects gaining prominence relative to traditional aesthetic renovations. Outdoor living space enhancements including decks, patios and landscaping have also captured increasing budget allocation as homeowners prioritize property functionality and entertainment capabilities. Professional contractor services have experienced strong demand growth, though supply constraints have extended project timelines and elevated labor costs across most renovation categories. DIY projects have also increased in popularity, particularly for smaller-scale improvements, as homeowners seek to manage costs while addressing maintenance and upgrade needs.