High Interest Rates, Low Savings Could Delay Necessary Home Renovations

By 2027, the number of existing homes in need of renovations is projected to reach 24.2 million, up from 20.5 million in 2018, according to a new report from the National Kitchen & Bath Association (NKBA). Rather than purchasing a new home in better shape, many would-be buyers bogged down by record-high home prices and elevated interest rates are opting to stay put and renovate, but according to The New York Times, even those remodeling projects could be put on hold due to affordability concerns.

Rising inflation throughout 2023 means that even as the national savings rate returns to pre-pandemic levels, Americans are still saving less money, and with little disposable income to invest into renovations, homeowners are likely to do fewer home upgrades throughout the remainder of the year.

Moving to a newer home that’s in better shape is out of reach for many people, because a new mortgage will usually come at a much higher interest rate. Eighty percent of interest rates on existing mortgages are below 5 percent, while the average rate for new mortgages was about 7 percent on July 20, according to Freddie Mac. But staying put and paying for a renovation may not be any easier.

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