How a Fed rate cut could fuel a home remodeling boom

Apart from the election, the FOMC decision is another major event this week. The Fed is expected to cut rates by 25 basis points Thursday. Falling rates are expected to be a boom for the home renovation space. Spending is expected to hit an annual rate of $477 billion for remodeling by Q3 of 2025, according to Harvard University's Joint Center for Housing Studies. Joining me now on The Outlook for the home remodeling market, we've got Angie Hicks. She is, of course, you will recognize her as the co-founder of Angie, formerly known as Angie's List. Good to have you here with us today. And so as you're thinking about the impact of rate cuts on the remodeling market, what are you keeping tabs on most notably and what could we see transpire? Yeah, I mean, when we think about the house, it's our most, for most of us, it's our largest investment and we need to make sure that it fits our lifestyle. So as we're watching interest rates potentially cut, they're still not going to be down to where some people have mortgages locked in around 3%. But if they start to come down a little bit, what we might see is people starting to tap into some of that home equity they've built up over the last few years. Maybe they'll take out a home equity loan in order to remodel that kitchen, add an extra bathroom to make sure their house is fitting what they need right now. And so with that in mind here, what are some of the tips that you have for homeowners that are thinking about remodeling as well and how they can prioritize the right projects? Well, when you're thinking about remodeling, the first thing you want to think about, identify your budget and understand how much you're comfortable spending. If it's a big project, I always encourage people to think about only giving the contractor, say maybe 90% of that budget. That way you're ready for any surprises that happen. And then start to determine what you want to do. Do you need a new kitchen? Is your bathroom outdated? And decide which project you want to tackle. And also think about how long you want to live in your house. If you're going to live in your house more than five years, a major renovation is something that could be on the table. But if you're thinking about moving in the next couple of years, maybe you want to go with a light refresh of, you know, changing out a countertop, new backsplash, something like that. And always be sure that you're not pricing your house out of the neighborhood. Know what the neighbors have and make sure that you're not putting things that aren't going to sell well for your neighborhood. I can't believe we made it this far in the fourth quarter without a backsplash mention. And we've finally just checked that box here. Thank you so much. And so, you know, as we're thinking about and we've been discussing, of course, the news of the day, which is, of course, the news that is still yet to come after today, which is the presidential election. As you've been evaluating what both candidates are saying, both primary candidates are saying about the housing market, how do you anticipate that will play out in the mindset of homeowners? You know, I think for homeowners, it's really about interest rates when it comes down to it, when it comes to making their housing decisions. You know, this is for most people that, as I mentioned, their largest investment. So they want to make sure they're getting a good deal. So if prices come, if interest rates come down a little bit, you might see some, you'll see some of this renovation activity start to pick up, you know, and then, you know, if they come down even farther, where people find that mortgage rates are more interesting to them, where they're like, hey, I'm not going to trade that 3% mortgage for a 6% mortgage. Maybe I'm going to trade it for a 5%. The housing market itself will start to move. And that could additionally drive more people, first-time homeowners getting into the market, as well as people moving and continuing to invest in that new house they're buying. You know, as much as elections tend to ratchet up people's anxiety, the homeowners associations in many areas, they say, hold my beer on that regard, because many of those homeowners associations drive people crazy as well. What are the three questions though, perhaps, that people who find themselves needing to negotiate with or go to a homeowners association before they're making a remodeling or a DIY project effort that they should be asking prior to embarking on that project? Yeah. Some people don't realize the influence a homeowners association can have on your decisions about your home. So when you're looking for a house, be sure you understand the regulations for that neighborhood. Get a digital copy of that information and then understand what things they have control of, or are there things that are just out of bounds? For example, are you allowed to have fences in your neighborhood? Because it's important that you have that information so that you know what changes you can make. And then ask about the process for approval. I think that's one of the things people might underestimate in their timeline. Do they need to see renderings of what you're doing? Do they get to decide on paint colors? And how is the process? Is it a quick couple of day process? Or is it something that takes a few weeks? So understanding those guidelines will be important to make your remodel go smoothly. Angie Hicks. Angie, co-founder. Thank you so much for taking the time here with us today. Thanks, Brad.