To move or to renovate — that may be the question some Americans are asking themselves given current real estate market conditions and other economic factors. The answer, it seems, could be shifting in the direction of staying where they are and renovating. According to the Harvard University Joint Center for Housing Studies, spending on home renovations is expected to reach $509 billion in 2025, exceeding a record $487 billion in 2023 — and signaling that U.S. homeowners may be slowly but surely expanding the size and scope of home projects.^1,2

Making home sweet home sweeter

Rock-bottom borrowing rates combined with stay-at-home restrictions drove a surge in home renovations during the pandemic, but expensive interest rates took a toll in the last two years, hampering reno plans for some.³

There are signs that renovations could be making a comeback. Sales of existing U.S. homes dropped 4.9% from December 2024 to January 2025, indicating the option to move may be getting more challenging for homeowners. And while rates have dropped slightly, they’re  expected to remain above 6% in 2025.⁴ According to Realtor.com, this could have many homeowners staying put and focusing on home improvement projects instead.⁵

Read more: Will home sales spring forward after tough winter?

Some design trend specialists predict this year will be about “rooting in place,” with almost two-thirds of U.S. homeowners budgeting at least $20,000 for home improvements in 2025.⁶ In 2024, Americans spent an average of $6,453 on home improvements according to Empower Personal Dashboard^TM data. 

Read more: Home sweet home: A majority of Americans want to age in place

Reno revenue stream

Existing homeowners may be better positioned than ever to take on renovations and improvements. While rising property values may have priced out some buyers, the flipside is they’ve also fueled soaring home equity. Over the last five years, homeowners have gained about $150,000 in home equity, roughly $30,000 annually. Almost half of all mortgaged homes are considered “equity-rich,” with owners holding 50% or more equity in their properties. This surge opens the door for homeowners to tap into that cash to fund their projects.

Read more: Equity rich: How American homes built $30K-a-year in value

Hammering away at the budget

Remodeling costs, which are frequently paid out-of-pocket, can sometimes be tricky to estimate: On average, people tend to go 10% to 15% over budget when renovating, which can add up quickly.⁷

Where are most home improvement dollars going? Projects with the heftiest price tag include kitchen remodeling, roofing, bath renovations, and HVAC installs and upgrades, which cost $17,747 on average, but can run the spectrum depending on the type of system.⁸ 

Happy returns on investment

There are a few things to keep in mind when considering whether to take on renovations — and on what. Some projects can essentially pay for themselves by adding long-term value and enhancing the marketability of the home. Updating a kitchen or bath, for example, can potentially increase the bottom line: In 2024, a mid-range kitchen remodel cost $79,982, with about half of that cost (49.5%) likely to be recouped, and a mid-range bathroom remodel averaging $25,251 could recoup 73.7%.⁹ Outdoor kitchens, which run about $13,000 on average for a basic setup, retain their value with 100% cost recovery.¹⁰ Along with cosmetic upgrades that add value, HVAC heating and cooling systems can have a 103% return on investments.¹¹

Conversely, some renovations, like reducing closet size, adding a pool, or creating an overly personalized design, can actually devalue a home.¹²

When weighing the cost/benefit of improvements, in some cases the added value may be less tangible. Investing in certain projects is less about the return and more about the quality and happiness the upgrades may bring to everyday life.