- Americans are revving up their spending, which could fuel an economic boom.
- While they’re ready to splurge on experiences, they’re still spending on things for the home.
- It’s a sign that the homebody economy will be a new fixture in a post-pandemic world.
- See more stories on Insider’s business page.
Americans are going on a spending spree.
In a post-stimulus, increasingly vaccinated world, they’re ready to live like it’s 2019 again. They’re buying dresses, jeans, and crop tops and booking beauty services like mani-pedis and haircuts for their hot vaxx summer. They’re taking public transit, dining at bars and restaurants, and taking flight.
But something is different – the spending on private or homebound matters, which spiked during lockdown, is staying high. Americans’ yearlong stint inside boosted the homebody economy, a phrase coined in 2018 by Vox’s Kaitlyn Tiffany coined to describe the growing market among millennials, who couldn’t afford to do much but stay at home. Now, many Americans seem to be enjoying this way of life, and it doesn’t look like it’s going away anytime soon.
Home spending grew at a strong pace in April, according to a Bank of America Research note from May 14. It found that for the week ending May 8th, the average daily spending in home categories grew by 37.8% over a two-year basis. A recent survey by McKinsey & Co. found that consumers intend to continue the investments they made in their home life post-pandemic.
What McKinsey predicts is a “rebalancing” of the homebody economy. What emerged in 2020 is a new category of spending in the form of private consumption, that might be here to stay even as we return to normal. Home improvement, at-home cooking, comforts like bedding and pajamas, and online entertainment may all now get as much attention as experiences like travel and dining out traditionally have.
The home improvement boom
Many Americans turned to home renovation projects during quarantine, the beginning of a long-lasting boom.
Home improvement and repair spending grew by nearly 3% to $420 billion in 2020, per a recent study by Harvard University’s Joint Center for Housing Studies (JCHS). Abbe Will, one of the report’s researchers, previously told Insider they expect the home remodeling market to expand even further in 2021 – by 4% – as homeowners complete discretionary projects or those they put off during quarantine.
Spending at home improvement retailers is currently outpacing spending at product retailers, per the BofA data. And UBS’ Evidence Lab DIY survey found that a record percentage of homeowners are planning projects. In March, 71% showed intention to do a project within the next three months.
Baby boomers with equity led the home improvement boom, driven by newfound time on their hands, the desire to stay in their homes, and a historic housing shortage. With moving to a different place in such a cutthroat market an unattractive option and the value of homes going up amid record-high housing, they became more willing to spend on remodeling than past generations.
But millennials were cashing in on home projects, too. DIY renovation became a new form of discretionary spending during the pandemic for wealthy millennials, who no longer had travel and brunch to spend on. But it also became a way for the less wealthy subset of the generation to get their hands on a house amid a shrinking housing inventory.
Some, unable to outbid all-cash offers, resorted to buying fixer uppers. Many checked off their smaller, more budget-friendly renovations last year and are now facing more expensive renovations like bathroom and kitchen remodels that will continue to fuel the boom through 2021 and beyond.
Newfound at-home hobbies and luxuries
While home improvement spending has been one of the biggest sectors driving the sustaining homebody economy, the BofA note also found that spending in furnishings and bedding is playing a role. They’re both an offshoot of home renovations, but bedding also symbolizes an upgrade in comfort – with coziness a common theme in pandemic spending.
A spokesperson for Liketoknow.it told Insider’s Bartie Scott in April that consumers “are very much still in the cozy mindset,” continuing shopping for the things that began trending since the start of lockdown: loungewear, matching sets, nap dresses, and home bedding.
Self-care items like pajamas took the place of what Lorna Hall of London-based trend forecasting firm WGSN calls “scheduled spend” – the purchases people regularly made in their pre-pandemic routine, like coffee, commuter fare, and lunches out. These regularly scheduled budgets changed as routines did, but they might have found a permanent place as we change routines yet again. As Hall told Scott, “bedtime is a thing that comes around every day.”
As part of this routine shift, people also took on new at-home hobbies and domestic activities. The pandemic changed Americans’ cooking prowess, as many turned to the kitchen with nothing better to do. They made more meals at home, experimented with different palates, and focused more on healthy ingredients – all of which could have long-lasting effects on how people cook and shop for years, CNBC’s Melissa Repko reported.
It sparked a resurgence in meal kit delivery services, which McKinsey doesn’t see abating. Between 60% to 70% of respondents said they expect to continue digital food related activities after the pandemic, such as meal-kit delivery services and new store and restaurant apps. Respondents also expect to accelerate their digital spending in pet products and consumer electronics going forward, two categories that are also seeing two-year growth, per BofA data.
Spending on consumer electronics will only enhance the at-home entertainment experience. McKinsey also forecasts that the online entertainment and wellness habits adopted during the pandemic – think the TV watching and streaming surge and the turn to digital fitness apps and social channels – will remain for medium to long term.
A new era for the economy
Now, this isn’t all to say that Americans want to sit in their home forever. After a year locked up, they’re ready to break free and resume normalcy.
Vaccinated consumers are beginning to return to out-of-home activities and spending at near pre-pandemic levels, according to McKinsey. And consumers overall plan to spend extra on travel and mobility, out-of-home entertainment, and restaurants after the pandemic. But they’ve also “made substantial investments in their home life which they want to continue, even after the pandemic subsides,” the report reads.
The private consumption that gained foothold during quarantine finding its way into a post-pandemic landscape says a lot about the American mindset right now. For one, it’s likely that people realized both some of the conveniences and joys of a life at home, such as the ease of a meal kit or the luxury of sleeping in silk pajamas.
It also signals that for all the progress we’ve made, we’re not quite out of the pandemic just yet. The return to normalcy will be gradual, as many people need to more time to unfreeze from the trauma of the pandemic before transitioning to more out-of-home activities.
It’s also a sign of how the pandemic has introduced new ways of life. Some companies have announced long-term remote work options, and some Americans are ready to work from home forever. That means investing in a good home experience is more important than ever.
The predicted economic boomtime could usher in a new era in the US economy, one that will be reshaped by the pandemic. If consumer spending indicates anything, that will include a more pronounced desire for experiences, but also a more pronounced desire for being a homebody.