Why homeowners are skipping the backsplash to pay for the roof this year

Practical, not pretty, is what’s driving home renovations this year.

Persistently high home-loan interest rates, stalled home appreciation and the uncertain effect of tariffs are all flashing yellow for homeowners considering investments in their houses.

“They’re handcuffed to the house because of the rate and their equity. Yes, the buy-sell market is slow, so people are spending on renovations in lieu of selling and moving up,” Elliott Pike, owner of ELM Construction LLC, in Alabama, told Straight Arrow News.

“People have looked at the options and what they’re seeing is houses that also need work. So they’re staying put and making their homes the space they were looking for,” said Pike, who chairs the remodelers’ council for the National Association of Home Builders.

Why are homeowners ‘handcuffed’ to their current houses?

Splurging is out, except for primary bathrooms: “Most of our clients want the neighborhood to support fiscally what they’re doing,” he said.

The latest data bolsters homeowners’ caution. American houses appreciated in December at an annual pace of 1.3%, according to the S&P Cotality Shiller Index, which tracks the change in house values for the top 20 markets and is a major benchmark for the health of the residential real estate market.

This marked “the end of an unprecedented period of price growth,” said Thom Malone, a Cotality principal economist. In December, house values eroded a tiny bit — -0.2% for high-end houses — and as much as -0.4% for the lowest-valued tier of houses.

It doesn’t make much sense to spend freely on a house whose value is coasting, so homeowners are making rational decisions about renovation ambitions, Malone told SAN. “If you bought your home before prices went up, you have equity to pull. But maybe you just remodeled with that equity, a couple years ago. You did what you wanted to do when rates were zero. Now, rates are a lot higher,” he said. “There’s limited potential.”

Both major home-improvement retail chains — Lowe’s and Home Depot — told investors in recent earnings calls that this year’s sales would be flat at best. Home Depot’s chief financial officer reported that the company was assessing the potential fallout from the Supreme Court’s decision to strike down President Trump’s tariffs. Immigration raids, contractors told SAN, have sapped their confidence that they can promptly finish work they do land.

The newly released Leading Indicator of Remodeling Activity report from the Harvard Joint Center on Housing is slightly more optimistic, projecting a lift in projects this spring, followed by a fall slump.

Contractors who specialize in structural and functional renovation are facing homeowners fixated on extracting the most value for their increasingly expensive repairs, said Nick Riley, owner of Driftwood Builders Roofing, in Austin, Texas. Often, their decisions are rooted in two factors: how long they expect to stay in the house and how they’ll pay for the project. Those who expect to move relatively soon want a competent, basic approach that frees them from a bad home inspection when they do sell. Those who expect to stay indefinitely are opting for top-quality materials — such as metal roofs instead of asphalt shingles — to free themselves from future maintenance, he told SAN.

Return on future hassle frames financing decisions, too, said Riley and Malone. Homeowners with plenty of tenure don’t hesitate to borrow against their equity to pay for tomorrow’s maintenance at today’s prices. But those with scant savings or equity have little choice but to patch and pray. 

The National Kitchen & Bath Association’s recently released 2026 Kitchen Trends Report validates contractors’ observations: Designers agree that functionality for family life prompts millennials to update their kitchens, while Gen X and baby boomer homeowners are willing to spend money tweaking their kitchens for greater safety and accessibility as they age.

Why is function outranking luxury?

From his vantage as co-founder of City Lights, a renovation and house-flipping firm based in Grand Rapids, Michigan, Caleb Rights sees buyers hoping for houses with no lurking surprises, and the flip side – houses that are all surprises, due to cascading consequences of postponed maintenance.

Buyers might hope for a social shareworthy house with glossy finishes, and he typically adds at least one showcase element to feature in marketing, Rights told SAN. But, he noted, buying decisions are still grounded in finances.

First-time buyers, especially, “want to make sure that once they buy something they’re not spending more money to repair something three weeks down the road,” he said. That means that heating and cooling systems trump trophy countertops.

For sellers, that same mentality punishes procrastination. The rising cost of homeownership and living erodes some homeowners’ ability to keep up with maintenance. They hope that aspiring buyers will overlook more than chipped paint, and also forgive failing water heaters and leaking window frames.

They won’t, Rights said, and those sellers quickly become overwhelmed at the scope and cost of making their houses acceptable to buyers. When a major repair erupts, they decide to sell to a firm that can take the property and its problems off their hands. Buy-and-flip firms like his, Rights said, have to hit an ever-narrowing bullseye to make big fixes, add buyer-attracting polish and still reap a profit.

Which home improvement projects offer the highest ROI?

Though it trails the market, the annual Cost vs. Value report conducted by trade publisher Zonda provides insight into which projects owners think are. The report compiles a wide array of factors, from the cost of common projects by region, and analyzes the actual value added to a house for each one.

Pragmatic exterior improvements are the overwhelming winners, especially those that add inescapable curb appeal: a new garage door, for instance, would likely cost around $4,672 and add $12,507 to a home’s value — a 267.7% return on investment. The only interior project in the 2025 report’s top 10 is a minor kitchen remodel: it would likely cost around $28,458 and add about $32,141 to the house — a 112.9% return.

“Not every upgrade is going to add to your equity now,” Rights told SAN. “You don’t run across too many people with unlimited funds anymore.”