I’m thrilled to share another research milestone at Houzz. We recently released the findings of the fourth annual Houzz & Home study, covering renovation, decorating and custom build activity. More than 260,000 homeowners and renters around the world shared information on projects they worked on in 2014 and their plans for 2015. The U.S. findings are summarized in this report.
A new and exciting outcome of this year’s Houzz & Home study is the Houzz Renovation Considerations Index, which tracks the level of importance homeowners assign to eight commonly cited renovation considerations: design, functionality, resale value, energy efficiency, costs, health, sustainable materials, and smart technology.
As shown in the chart below, this year’s index values indicate that these considerations vary greatly in importance among homeowners. Design and functionality top the importance scale, with resale value, energy efficiency and costs following close behind. The majority of homeowners deem these five factors as very-to-extremely important (62%-91%) and very few consider them unimportant (1%-6%). In contrast, homeowners are significantly more divided on the importance of health, green, and technology-related considerations – 25%-45% deem them as critical to renovations while 19%-30% deem them entirely unimportant.
Impact of Income and Age on Importance of Resale Value, Minimizing Costs
Some interesting findings emerge when looking at these considerations across the household income and age of homeowners (see chart below). Three-fourths of homeowners with an annual income of $50K or less consider minimizing renovation costs a critical factor in recent renovations, compared to only a third of those with incomes of $500K or more (39%). In contrast, two-thirds of homeowners consider improving resale value to be very-to-extremely important, regardless of income levels.
It is not surprising that higher-income households consider home resale value just as imperative as the lower-income households, however – home equity is the single largest contributor to net worth for a majority of U.S. households across income levels.
According to the 2011 Survey of Income and Program Participation from the U.S. Census, the net worth of a median household at the bottom 20% of the income distribution was primarily composed of home equity (71%). For half of households at the top 20% of the income distribution, home equity contributed to a whooping 44% or more of their net worth, making property an important asset to the overall household’s wealth. Given this, most homeowners at nearly all income levels are likely to look at renovations as improvements to not only the style and functionality of their home, but also to the value of their largest asset.
It is interesting to note that Millennial homeowners (25-34) are likely to rate minimizing costs and improving resale value as somewhat more important than older homeowners (65+). While the difference is not large, it is remarkably consistent across all income levels, pointing to further socioeconomic differences, among others. For example, younger generations experience a greater debt burden (e.g., from student loans) and greater day-to-day expenses (e.g., young children) than older homeowners, which likely explain some of the differences in the importance of minimizing renovation costs. Furthermore, they are more likely to move in their lifetime than Boomers, explaining the differences in the importance of resale value.
Health and Green Considerations Differ with Income and Age
An often-cited trend in the home remodeling industry is the integration of green/sustainable products and materials and removing health hazards in the home environment during renovations. The chart below sheds some light on how these considerations vary depending on age and income.
It is noteworthy that the importance of both factors increases as income declines. For instance, Millennials score health-related considerations higher and environmental considerations lower than Boomers. It makes sense that Millennials are more health-oriented during renovations than older generations, since Millennial homeowners are more likely to be young parents (44% have minors living with them vs. 6% of Boomers), are likely to have more problematic homes (their average home was built in 1970 vs. 1975 for Boomers), and have had less time to address health hazards than Boomers (83% moved in the last 5 years vs. 25% of Boomers). In light of these differences, as well as the greater expense associated with green/sustainable products and materials, it is no wonder that Millennials are also less likely than Boomers to make the integration of green and sustainable products and materials a priority so early in their homeownership cycle.
Smart Technology – Priority Grows with Income
Finally, it is interesting to look at how tech considerations vary with income and age. Energy efficiency, often associated with the efficiency of home equipment, windows, insulation, etc. has long been known to be a priority to homeowners. Yet, we still know little about the importance of smart technology in home renovations. The chart below shows that improving energy efficiency remains critical to renovations across all income levels. In contrast, integration of smart technology is less of a priority, although it becomes increasingly important for higher income households. As smart technology becomes more accessible both in terms of cost and value proposition, we are likely to see it grow in importance.
More to Come…
We are continuing to uncover a wealth of insights from the 2015 Houzz & Home data, including findings from Canada, UK, Australia, Germany and France. Stay tuned for more!