*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor registered financial expert. Please see a financial advisor before making investment decisions.

*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor registered financial expert. Please see a financial advisor before making investment decisions.

Photo by Brooke Winters on Unsplash

Home improvement has been one of the bright spots in the retail apocalypse. With Home Depot and Lowe's reporting huge sales both online and in-store while other retailers like JC Penny and Neiman Marcus going bankrupt, why is it that home improvement is doing well?

Overall, it comes down to three reasons:

• rising home values
• the growing purchasing power among the millennial generation
• homes getting older on average

Rising Home Values

Photo by Morning Brew on Unsplash

Because home values are rising, many homeowners feel wealthier. Because of it, they're willing to take out a home equity line of credit (HELOC) and use the funds to buy new countertops, make renovations, etc. Many renovations are funded with HELOCs.

Also, for those looking to buy a home, rising home values force buyers to buy older and lower quality homes in order to stay in their budget. Because of it, those new homeowners have to spend money to update and fix it.

Millennials are getting wealthier

Like I mentioned in the previous paragraph, many new home buyers have to buy lower-quality homes to stay within their budget. Some millennials are buying homes below their budget and investing the rest of the proceeds on updates and fixes on their home to suit their needs.

And for the millennials that are already homeowners, the rising home values allow them to take out HELOCs and use it to build a backyard pool, change the flooring, fix the roof, etc.

Homes are getting older

Did you know that around 40% of homes in the USA are over 40 years old!

This is a big reason why many are spending money on home improvement products. Especially with the average home being really old, imagine the amount of work that home needs after years of storms, heat, and the other things mother nature throws at it. Also, as people get older, they need to spend money on renovating their house to fulfill their needs. With old age comes more physical challenges in daily life.

While the home improvement sector is smaller compared to many other sectors in retail, it is larger than many other industries. That growth continues as work from home encourages people to spend money on retrofitting their homes to their new wants and needs. Plus, many other industries like restaurants and clothing stores will continue to shrink, making the home improvement industry look a lot bigger than those industries too.

What many haven't realized about the home improvement market is that the sector has been booming even before the pandemic. The Baby Boomers were their big customers back then because they needed to make modifications to their home as they got older and their joints stiffen. Today, the baby boomers are still one of their biggest customers but now, the millennials are starting to come into the scene.

There are a variety of reasons why millennials are starting to demand more products from home improvement stores. One is that Real estate investing has caught their awe of many millennials and because of that, they’re looking to convert any living space into a rental (like a garage or even a house in the backyard). If you think about it, the accessory dwelling units (ADUs) that millennials are building can also serve as living spaces for Gen Z folks.

Another reason is that they want to make changes to their homes as work from home because of the new way they work. Since most homes weren't made for the work from home phenomenon, many homeowners are looking to renovate their homes to fit their new lifestyle. With that, their growing wealth allows them to afford these renovations.

A big influence on the home improvement spending boom is interest rates. Instead of moving to a bigger home because your family is getting bigger, millennials are investing in renovations to make the home more suitable to their needs. This goes along with rising home values and the growing wealth many millennials are experiencing.

During a pandemic, as people are stuck at home and are forced to make the most of it, many are spending money on things to make their homes more suitable to their new reality. Plus, since there isn’t a lot of fun happening in a pandemic, stores are now selling out of things like inflatable pools and activity boxes, and other items that give consumers a sense of fun at home. Also, companies that provide goods for the lawn are experiencing a huge boost in sales as more people are looking to take care of their lawns.

Overall, with an increased focus on making their homes suitable to their needs, home improvement stores have been experiencing a huge boost in sales on things like remodeling tools to gardening products to even items that make the backyard, fun. Plus, as homes get older and people get older, there will continue to be a demand for home improvement products as people will continue to make changes to their home in order to suit their living needs.