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

Homeowners are spending big on renovations, but they’re losing momentum. Total spending on home improvements and maintenance is expected to hit $522 billion by the end of 2026, even as year-over-year growth slows from 2.9% in early 2026 to 1.6% by year-end.

The latest Leading Indicator of Remodeling Activity, released Monday by the Harvard University Joint Center for Housing Studies, marks a clear downshift after a modest rebound in 2025, raising fresh questions about whether the broader housing market is settling into a sluggish phase—or simply normalizing after years of volatility.

“A downshift in remodeling growth, even as total spending reaches a high level, points to a slow-growth, normalization phase rather than a downturn in the housing market,” says Hannah Jones, senior economic research analyst at Realtor.com®.

And while the national trend may be cooling, early sales and permitting data suggest that some local markets may be heating up.

High costs and changes in habits are driving the trend

The report notes that remodeling trends closely track the housing market, and right now, both are being squeezed by the same pressure point: high costs.

Chief among them are mortgage rates, which are forecast to average 6.3% in the year ahead, according to the 2026 Housing Forecast from Realtor.com. While it’s a sign of some affordability relief for homebuyers, it can complicate the picture for homeowners looking to tap into their equity for remodeling money.

Only 21% of homeowners with outstanding mortgages have an interest rate above 6%, a marked decline from recent years but still a sign of the significant share of homeowners who have lower interest rates.

Home equity loan interest rates are also expected to ease in the year ahead, according to Bankrate’s regular survey of rates. But even so, they’re expected to average 7.75%, while home equity lines of credit will come in closer to 7.3%. These rates are likely to make many homeowners think twice before diving into large discretionary renovations.

At the same time, pandemic-era remodeling habits are fading.

“The pace of growth is easing as pandemic-era drivers, including extra savings, forced time at home, and emergency upgrades, continue to fade,” says Jones. “This is consistent with a 2026 environment characterized by modest housing activity, constrained affordability, and cautious consumer behavior, rather than broad-based weakness.”

Labor and material costs are further complicating the equation. 

Construction costs accounted for 66.4% of the average price of a new home, compared with 60.8% in 2022, according to the National Association of Home Builders' Cost of Construction Survey. Tariffs alone added roughly $30 billion to the cost of investment in residential structures, according to an analysis from Brookings.

That cost pressure is shifting homeowner priorities.

“Higher labor costs, tighter budgets, and selective project decisions all eat into remodeling activity,” she says.

The result is a shift away from ambitious, lifestyle-driven remodels and toward targeted, need-based upgrades.

“Homeowners appear to be prioritizing necessary maintenance and targeted improvements over large discretionary renovations, which aligns with a market still adjusting to higher mortgage rates and elevated home prices,” she says.

The markets that could outperform the nation

“Single-family home sales and permitting activity have picked up modestly from very low levels, which should support a nominal increase in remodeling activity this year,” notes Rachel Bogardus Drew, director of the Remodeling Futures Program at the Harvard center.

But that activity isn’t being felt equally across the country.

“The modest rebound in single-family home sales and permitting activity suggests that remodeling demand is likely to be most resilient in markets where turnover and household formation are picking up, even gradually,” explains Jones. 

She points to Sun Belt metros and growth corridors across the South and West, where housing stock is newer, migration is stronger, and more households are forming. 

Cities like Austin, TX, Raleigh, NC, Nashville, TN, Phoenix, and parts of Florida may see remodeling growth outpace the national average, driven by both new owners renovating recent purchases and existing homeowners adapting homes for multigenerational living or evolving needs.

Older homes and high demand

Beyond fast-growing Sun Belt metros, remodeling activity may also hold up in markets defined by older housing stock and chronically tight supply.

“Markets with aging housing stock and limited new supply, where buyers often remodel shortly after purchase to update older homes could also see more activity,” says Jones.

In these markets, buyers frequently face a trade-off: Accept an outdated home and invest in improvements, or compete aggressively for a smaller pool of move-in-ready listings at much higher prices. As affordability pressures persist, more households are choosing the former, keeping remodeling demand afloat even as overall growth slows.

At the same time, the resale payoff for renovations remains real, though it has softened.

“Recent research on flipped homes shows that renovated homes still get more page views per listing and spend less time on the market than other older homes, but this advantage has deteriorated since 2021 as mortgage rates have grown.”

In other words, remodeling can still improve marketability, but it is no longer the near-guaranteed value boost it was during the pandemic-era housing boom.

That dynamic reinforces the broader shift toward practical, targeted upgrades, and a slower year ahead for remodeling spending growth.