Why the Frozen Housing Market Is Creating Mixed Signals for Home Remodelers
Annual spending on home improvements and repairs is expected to hover around $525 billion through the third quarter of next year, with growth sluggish at just 1.5% year-over-year, according to the Leading Indicator of Remodeling Activity from Harvard University’s Joint Center for Housing Studies.
Contractors face a challenging environment because elevated property values, towering interest rates, and low consumer confidence have thoroughly paralyzed the housing market. Home remodelers traditionally serve two distinct markets that are now pulling in opposite directions. People tend to remodel when they move, or they renovate when they are unable or don’t want to sell.
Divergent Signals Across the Sector
Retail spending on building products has been flat to negative while remodeling permits have stagnated. That data points to continued sluggish renovation activity.
“Retail spending on building products has been flat to negative, and remodeling permits have stagnated, which points to continued sluggish renovation activity,” said Rachel Bogardus Drew, director of the remodeling futures program at the Center, in a release.
September single-family housing starts reported by the U.S. Census Bureau fell well short of projections, matching a similar drop in building permits, which serve as a barometer for future building activity. Additionally, the National Association of Realtors reported that pending home sales, tracked via executed contracts, tumbled past forecasts.
“These ongoing headwinds could slow growth in remodeling spending even further in the quarters ahead,” said Chris Herbert, managing director of the center in the release.
Conflicting Outlooks From Industry Groups
Because the stagnant housing market generates mixed demand across client demographics, home remodelers are encountering contrasting pressures. While macroeconomic indicators show stagnation, localized sentiment reports offer slightly different nuances.
The National Association of Home Builders released an October report showing stable sentiment among home remodelers in the third quarter, though without forecasting big growth in 2027.
Remodeler sentiment remained stable in the third quarter, although remodelers in certain parts of the country continue to report issues with high material costs and finding enough labor to finish projects on time. Remodelers also report that economic uncertainty is making some potential customers hesitant to move forward with projects.
— Elliott Pike, national chair of the NAHB remodelers council and a remodeler from Homewood, Alabama
At the same time, an October report from Houzz showed an improved outlook among construction professionals, though design firms remained more cautious.
“Construction pros are closing out 2026 with optimism, as expectations reach their highest level since early 2022 following a rebound from a long stretch of slow activity. Design firms are more measured, though cautiously optimistic,” said Marine Sargsyan, head of economic research at Houzz.
Contractors Absorb Fuel Costs Amid Uneven Demand
Expenses related to fuel continue to burden a majority of enterprises, leading certain professionals to pass these overheads onto consumers through extra fees and elevated rates, while remaining businesses choose to absorb the impact within their profit margins.
As material costs, labor shortages, and economic uncertainty persist, contractors and home improvement retailers must handle uneven demand patterns through late 2027.