There’s no shortage of studies focusing on the buying power of millennials. However, when it comes to who is revving up sales in the home improvement industry—baby boomers are in overdrive. According to a study by the Joint Center for Housing at Harvard University, “Average per owner improvement spending is projected to increase by more than 10 percent among homeowners age 55 and over, while the number of homeowners in this age group soars at twice that rate.” Even more surprising, by 2025 one-third of all home improvements will be made by homeowners 65 and older.
While most people believe older homeowners are eager to downsize or relocate to retirement communities, many prefer to age in place by creating a home environment that can accommodate them in the upcoming decades of their lives. It may mean hiring contractors, landscapers, or doing the project themselves. Factor in Gen X and the money spent on home improvement projects become even more substantial. In 2015 their share of spending was slightly less than 52 percent, by 2025 it is projected to reach 56 percent.
The Harvard study points out that all age groups are spending money to improve their homes. Baby boomers topped the list. Here are five reasons why this influential group of purchasers is driving home improvement sales.
Tapping into Home Equity
There is a direct correlation between the availability of home equity and the ability of owners to make upgrades to their homes. Baby boomers have a record amount of home equity because many of them have lived in their home for years. A primary reason for the surge in Home Depot’s sales is the willingness of homeowners to use the equity in their homes to remodel, make repairs, and upgrades. “Since 2011, home equity is up 108 percent”, Carol Tomé, CFO of Home Depot, told analysts. “On average, that equates to $50,000 per household. And we believe that’s contributing to our growth.”
Aging in Place
Homeowners who want to remain in their homes as they grow older are in a better financial position to fund their home improvement projects, than most younger homeowners. Harvard research results indicated that almost 3 million homeowners were in the process of spending money on projects that will make their homes more accessible. Seventy-two percent of the respondents were at least 55-years-old.
Millennials’ Mounting Debt
For a variety of reasons, millennials have more debt than baby boomers acquired at the same age. Making large purchases to fix-up their homes may not be an affordable option. Similar to older generations, millennials are caught in the aftermath of the 2008 recession. In 2005, 43 percent of homeowners were under the age of 35. In 2015, that figure fell to 31 percent. For many millennials, the inability to become a homeowner is compounded by student loan debt and the rising cost of purchasing a home.
DIYers aren’t about to give up their drills. However, they’re not reluctant to call in a professional to tackle the home improvement projects they prefer not to handle themselves. A recent Home Improvement Research Institute (HIRI) purchase tracking study found that the number of services purchased in a year increased by 40 percent. Services were equally split between convenience (lawn/landscaping, Insect/pest control) and knowledge-based services (HVAC, plumbing). Sixty-five percent of the homeowners using this service are “Matures.,” those over the age of 67. Of the four groups listed in the study, Baby boomers were the least likely to hire services. However, at fifty-two percent, their rate of usage was similar to that of Gen-X, and millennials.
Baby Boomer Customers
Good retailers know that every customer is critical to their business. The products baby boomers purchase may change as they age and modify their homes. However, understanding who your customer is and what motivates them to purchase certain products will enable you to provide an exceptional shopping experience. Harvard’s, The Joint Center for Housing, projects home improvement spend will top $269 billion by 2025. Baby boomers will play a significant role in generating sales for the entire industry.