Industry overview

Home remodelers have always served two different markets, and the frozen housing market is now pulling them in opposite directions. People usually renovate when they move, but high interest rates, high home prices, and weak consumer sentiment have put home sales in a deep freeze. At the same time, homeowners who cannot or do not want to sell often choose to improve the homes they already have. Which of those two forces wins will decide where remodeling demand goes next.

Harvard University’s Joint Center for Housing Studies expects annual spending on home improvements and repairs to stay roughly flat through late 2027. Its Leading Indicator of Remodeling Activity, from the Remodeling Futures Program, puts growth at just 1.5% year over year by the third quarter of next year, with annual spending hovering around $525 billion. “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.

September housing data was weak across the board. The U.S. Census Bureau reported that single-family housing starts came in well below expectations, as did building permits, a gauge of future construction. Pending home sales, measured by signed contracts, also plunged beyond expectations, according to the National Association of Realtors. “These ongoing headwinds could slow growth in remodeling spending even further in the quarters ahead,” said Chris Herbert, the Center’s managing director.

Two October reports were slightly more encouraging, but neither forecast strong growth in 2027. The National Association of Home Builders found remodeler sentiment stable in the third quarter, although remodelers in some parts of the country continue to face high material costs and difficulty finding enough labor to finish projects on time, and economic uncertainty is making some potential customers hesitant to move forward, said Elliott Pike, national chair of the NAHB remodelers council and a remodeler from Homewood, Alabama. Houzz, an AI platform for construction and design professionals and homeowners, reported a brighter outlook with some caveats: construction professionals are closing out 2026 with optimism, with expectations at their highest level since early 2022 after a long stretch of slow activity, while design firms are more measured, though cautiously optimistic, said Marine Sargsyan, head of economic research at Houzz. She added that fuel costs remain a pressure point for most businesses, with some professionals passing them on to clients through higher prices and surcharges and others absorbing them in their margins.

Industry overview based on CNBC

What it means for investors

A flat remodeling market through late 2027 means little top-line growth for the companies that supply it: building-products retailers, manufacturers, and distributors tied to home improvement. With spending growth projected at just 1.5% and annual outlays stuck near $525 billion, the sector looks more like a share-taking contest than a growth story, favoring larger, well-capitalized players that can win work from smaller rivals. Housing starts and permits, both running below expectations, are the numbers to watch, since they lead remodeling demand, and a sustained turn there would be the first sign of a recovery. The brighter Houzz outlook and stable NAHB sentiment suggest the downturn is bottoming rather than deepening, which supports a patient stance: remodeling demand is levered to a housing thaw, and any meaningful drop in mortgage rates could unlock both moves and move-related renovations. Until then, expect pricing pressure and uneven demand, with regional differences mattering more than the national average.

What it means for employees

For workers in the remodeling trades, the picture is mixed but not bleak. Remodelers in some regions report they still cannot find enough labor to finish projects on time, which means skilled carpenters, electricians, plumbers, and other tradespeople remain in demand even while overall spending is flat. That labor scarcity can support wages and steady work for experienced crews. At the same time, flat spending growth and hesitant customers limit how much firms can expand hiring, and economic uncertainty is delaying some projects, which can mean uneven schedules. Workers with in-demand skills and flexibility across regions are best positioned, while those at firms dependent on move-related remodels may see softer pipelines until housing turnover picks up.

What it means for customers

For homeowners, the frozen market makes remodeling the practical alternative to moving: high rates and high prices keep many people in place, and improving the home they already own is often the cheaper path to more space or a better kitchen. But customers should expect the costs the industry is wrestling with to reach them. Some professionals are passing higher fuel and material costs through in the form of higher prices and surcharges, while others absorb them, so quotes for the same job can vary widely and it pays to compare. Labor shortages in some regions can also mean longer waits to get a project started and finished. With remodelers’ expectations improving, demand may firm up into 2027, so homeowners planning major work may find better availability and pricing by booking before the market turns.

Note: Investment calculations and projections are for illustrative purposes only. Market conditions change frequently. Consult a qualified financial advisor before making investment decisions.