Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Home Renovation Industry
Transcript
- Lucas: Let's start with a number that stopped me cold. The Joint Center for Housing Studies at Harvard projects that by 2030 — just four years from now — households with children under 18 will account for only 28 percent of all U.S. households. Back in 2000, that number was 35 percent. Luna: That's a pretty dramatic drop. And it's not just about fewer kids per family — it's that more adults are living alone, or with a partner and no kids, well into middle age. Lucas: Exactly. And this shift is reshaping a massive industry that most people don't think of as demographic-driven: home renovation and improvement. We're talking about a market that's roughly $500 billion annually in the U.S. alone. Luna: So the question becomes: what are people renovating for, if not for kids? Lucas: Right. And the answer, based on industry data, is a pretty clear pivot. For decades, the prototypical renovation was the family kitchen — open concept, island big enough for homework, durable surfaces. Or finishing the basement into a rec room. Or adding a bedroom for a growing family. Luna: Those are still happening, but the mix is changing. Lucas: Dramatically. According to the National Association of Home Builders' latest remodeling survey, the share of projects that include adding or expanding a home office went from 12 percent in 2019 to over 30 percent in 2025. That's not just a Covid blip — it's persisted and grown. Luna: And I'd guess a lot of those home offices are in houses where the kids' rooms have been repurposed. Lucas: Exactly. Anecdotally, real estate agents report that 'flex space' — a room that can serve as a guest room, office, or workout studio — is now a top request. That's a direct reflection of households where the children are grown or never existed. Luna: So what does this mean for the big players? Home Depot and Lowe's — they're obviously paying attention. Lucas: They are. Home Depot's merchandising has shifted noticeably. Their in-store displays for outdoor play sets and nursery paint have shrunk. In their place: more home organization systems, smart-home tech, and what they call 'aging-in-place' products — grab bars, walk-in tubs, lever-handle faucets. Luna: Aging-in-place is a huge one. The baby boomer cohort is the wealthiest generation of homeowners, and they're not moving — they're retrofitting. Lucas: Right. And they're spending serious money. The average aging-in-place remodel runs between $10,000 and $50,000, depending on scope. Wider doorways, no-step entries, curbless showers. That's a premium ticket compared to the $2,000 weekend paint and fixtures project. Luna: I've also noticed — and this might be more anecdotal — that luxury bathroom remodels are everywhere. Marble, heated floors, steam showers. It seems like people without kids are putting their disposable income into the home as a sanctuary. Lucas: There's data behind that too. Houzz, the home renovation platform, reported that primary bathroom renovation spending grew 15 percent year-over-year in 2025, while kid-focused projects like nursery conversions declined. And the typical renovator is now 45 to 64 — prime empty-nester age. Luna: So what happens to the classic 'builder-grade' subdivision where every house has three bedrooms and a yard? Are builders adjusting their floor plans? Lucas: Some are. Toll Brothers and Lennar have introduced 'downsize' communities — often 55-plus — with one-story homes, low-maintenance yards, and flexible rooms. But even in standard subdivisions, the average new home size has actually increased slightly, even as household size shrinks. That sounds counterintuitive. Luna: It does. Why would people want more space if they have fewer people? Lucas: Because they're using that space differently. A home office, a dedicated guest suite, a home gym, a craft room. The number of rooms per person is rising. In 1980, the average U.S. home had about 1.5 rooms per person. Today it's over 2.2. That's a huge shift in how we conceive of home. Luna: And that means the renovation industry is actually growing faster than the population would suggest. Fewer kids, but more renovations per household. Lucas: Exactly. The Harvard center's data shows that real spending on home improvements per owner-occupied household rose from about $3,000 in 2019 to over $4,200 in 2025. That's a 40 percent increase in real terms. Demographics are a tailwind. Luna: I want to bring up one more angle: the second-home renovation market. With fewer people tied to school districts, more empty-nesters and remote workers are buying vacation homes and fixing them up. Lucas: Great point. The National Association of Realtors reported that second-home sales hit a record share of total transactions in 2024, and a big chunk of those buyers are 50-plus. They're then spending on renovations — often kitchen and bath — to make the place rental-ready or comfortable for extended stays. Luna: And that market is especially strong in places like Florida, Arizona, the Carolina coasts. It's not just about where people live — it's about how many homes they're maintaining. Lucas: Which brings us to the labor side. Skilled trades like carpentry, plumbing, and electrical are already in short supply. If renovation demand keeps growing even as the overall population ages, who's going to do the work? Luna: That's a looming problem. The median age of a construction worker is around 42, and fewer young people are entering the trades. Immigration policy is a wildcard. Lucas: Yeah, and that's a whole episode. But for now, let's stay on the demand side. One more data point: the home improvement industry's revenue mix is shifting from materials to services. Lowe's now generates over 30 percent of its revenue from installation services — up from about 20 percent a decade ago. Luna: That makes sense. If you're a 65-year-old who wants a walk-in tub, you're probably not installing it yourself. Lucas: Right. So the business models are adapting. And I think there's a broader lesson here: demographic change isn't about decline. It's about reallocation. The same number of dollars — or more — are flowing into home renovation, just for different reasons. Luna: That is a really helpful way to frame it. It's not that the market is shrinking; it's that the customer is different. Lucas: And if you've found yourself thinking about how the economy is shifting under your feet — that's exactly what this show is about. A couple of dollars a month is genuinely what keeps these episodes coming — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Yeah, it's a small thing that makes a big difference for us. Keeps it ad-free and independent. Lucas: So back to home renovation. The question I keep coming back to: can the industry sustain its growth trajectory as the housing stock ages? The median home in the U.S. is now over 40 years old — that's a natural driver of replacement spending. Luna: So even if demographic tailwinds moderate, there's a stock effect. Old roofs, old HVAC systems, old windows — they all need replacing. Lucas: Exactly. And those replacements tend to be higher-ticket. A new roof is $10,000 on average. New siding, similar. So the renovation industry has multiple engines: demographic preference shifts, aging housing stock, and wealth concentration among older homeowners. Luna: I think one risk factor is interest rates. Renovations are often financed through home equity loans or cash-out refinancing. If rates stay elevated in 2026, that could dampen some of the big discretionary projects. Lucas: That's a real headwind. According to the Fed's latest data, home equity lines of credit are down about 20 percent from their 2021 peak. But the flip side is that homeowners have record levels of tappable equity — roughly $30 trillion collectively. So there's dry powder. Luna: And a lot of that equity is held by older homeowners who are less rate-sensitive because they have lower leverage. They might just pay cash. Lucas: Right. So the industry's near-term outlook is mixed, but the structural story is clear. Fewer kids, more renovations. The home is becoming less of a 'family machine' and more of a 'personal retreat and asset to optimize.' Luna: I love that phrase — 'personal retreat and asset to optimize.' That really captures it. And it makes me wonder: what's the next industry that demographics will quietly reshape? Lucas: We'll get to that soon. For now, the takeaway is that home renovation isn't just about fixing up a house. It's a mirror of how we live — and how that's changing, one room at a time.