Remodeling Growth Expected To Cool in 2026—but These Markets May Buck the Trend

Total spending on home improvements and maintenance is projected to reach $522 billion by the end of 2026, though year-over-year growth is expected to slow significantly. This deceleration signals a transition into a normalization phase for the sector as pandemic-era drivers fade and high costs for financing and materials persist. For the home improvement industry, this shift suggests a move away from large discretionary projects toward essential maintenance and targeted upgrades.

According to the latest Leading Indicator of Remodeling Activity (LIRA) from the Harvard University Joint Center for Housing Studies, the remodeling market is entering a slow-growth phase. While total annual spending is forecasted to hit $522 billion by late 2026, the growth rate is expected to drop from 2.9% at the start of the year to just 1.6% by the fourth quarter. Hannah Jones, a senior economic research analyst at Realtor.com, describes this trend as a "normalization phase" rather than a market downturn, reflecting a cooling after years of extreme volatility and pandemic-driven demand.

The slowdown is primarily attributed to persistent financial pressures, including mortgage rates forecast to average 6.3% and home equity loan rates expected to hover around 7.75%. These high borrowing costs, combined with elevated labor and material expenses, are forcing homeowners to be more selective. Construction costs now represent 66.4% of the average new home price, up from 60.8% in 2022, while tariffs have added approximately $30 billion to residential investment costs. Consequently, the market is shifting from ambitious, lifestyle-driven renovations toward necessary maintenance and smaller, need-based improvements.

Despite the national cooling trend, certain geographic regions are expected to remain resilient due to stronger migration and household formation. Rachel Bogardus Drew of the Harvard Remodeling Futures Program notes that modest gains in single-family home sales and permitting will support localized activity. Specifically, Sun Belt metros like Austin, Raleigh, Nashville, and Phoenix, along with parts of Florida, are likely to see remodeling growth outpace the national average. Additionally, markets with aging housing stock and limited new supply remain prime areas for renovation as buyers update older homes shortly after purchase.