Now could be an ideal time to embark on home renovations, as core inflation, which measures consumer prices excluding volatile food and energy categories, has sunk to its lowest level in two years.
While costs remain higher than pre-pandemic levels and some homeowners still face longer-than-usual project timelines, there has been some recent relief. The cost of major appliances decreased by nearly 10% in July compared to a year ago, according to the latest Consumer Price Index data out Thursday. Furniture and bedding prices have fallen nearly 3% since July 2022, while living room, dining room and kitchen furniture prices were down 4.8%.
“Any cooling of building material prices would be beneficial to homeowners looking to do projects this year or next,” said Abbe Will, associate project director of the Remodeling Futures Program at the Harvard Joint Center for Housing Studies.
The slowdown in price growth could give homeowners more clarity when it comes to estimates for projects, compared to a year ago when price fluctuations could send project costs ballooning. An April survey by Discover Home Loans found that 59% of respondents had chosen to postpone home renovation projects in the face of increased costs.
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Bill Owens, a home remodeler based in Worthington, Ohio, said that throughout the last few years of unpredictable prices, his company has been writing proposals “chock full of allowances.”
“If we put in an order for a dishwasher, we might have seen a price increase before it was actually delivered,” he said. “That’s gotten a lot better. … There’s an ability for us to give more of a solid fixed-price contract with fewer allowances.”
Lumber prices, which reached record highs during the pandemic, have come down by around 20% in the last year.
Still, while prices may be down on home appliances and lumber, other building materials, such as asphalt, concrete and roofing, are more volatile, Owens said, meaning that estimates for projects dependent on these materials are more likely to change.
Don’t count on prices to decrease much more, Owens warned. “Construction is on sale today compared to tomorrow,” he said. “I couldn’t support the idea that it’s going to be cheaper in the future. If anything, prices are going to either stabilize or go up.”
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Expect Long Wait Times
Another rule of thumb for home-remodeling projects: Always budget more time than you think—even now.
Remodelers have only recently been able to return to some projects that may have been delayed due to supply chain issues created during the pandemic or the high cost of building material, said Robert Dietz, chief economist with the National Association of Homebuilders.
“Despite the fact that interest rates are higher and it’s harder to get a home equity loan, remodelers still have a backlog,” he added.
Data from Houzz, a company that connects homeowners with remodeling services, shows that the project backlog for architects and interior designers was 6.4 weeks at the start of July, a week shorter than the same period last year. The backlog for the construction sector is even longer—13 weeks nationally, 2.5 weeks longer than last year.
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“The planning and execution of projects are still taking closer to nine months,” said Marine Sargsyan, a Houzz economist.
Causing these delays are the same conditions that impacted construction time during the pandemic: consistent labor shortages in the construction industry, as well as supply chain issues.
“We’ve seen the supply chains recovering from what they were before,” Sargsyan said. “Still, we do hear pros tell us that certain items—for example, windows and doors—take a really long time to reach the consumer.”
A Houzz survey this year found that nearly half of businesses report moderate to severe shortages of products and materials, and that nearly two-thirds had reported shipping delays once purchased.
“We do still have issues with the supply chain, where it takes really a long time to get products and materials on to the building sites and to homes,” Sargysan said.
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Owens, the Ohio remodeler, has a piece of simple advice: “In most markets right now, you still need to be patient.”
With prices and wait time for materials still in flux, Owens has seen homeowners scaling down the size of their project in an effort to spend less.
“There are ways that we’re seeing the consumer adapt,” he said. “We’re seeing less additions—people aren’t necessarily adding more square footage. They’re being a little bit more wise, more judicious.”
Other owners are speeding up projects by trading out higher-end finishes for more mid-level finishes and building materials, he added.
Take Advantage of a Down Housing Market
There’s another case to be made for renovating now. Given that many people make renovations in preparation for a home sale, demand for home remodeling tends to track with the ups and downs of the housing market.
“The run up in interest rates had a pretty strong effect on single-family construction during 2022, and it had a negative effect on remodeling,” said Dietz.
With both the housing market and renovation market cooling down, now could be the best time to remodel. A survey by the National Association of Homebuilders found that most home remodelers expect activity to remain flat for the rest of the year, but pick up again going into 2024.
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Capitalize on Years of Home Appreciation
Beyond recent softer prices, homeowners may have another major reason to invest in renovations now: near-level records of home equity.
The average homeowner gained $125,000 in home equity during the pandemic, according to the Harvard Joint Center for Housing Studies.
“Rising home values and rising home equity levels are a big confidence booster for investing in your home in a bigger way,” Will said.
More equity means homeowners may be able to get larger loans to fund home improvements.
That may be important for costlier projects, like replacing a roof or making a home addition. Research from the Harvard Joint Center for Housing Studies found that home-equity lines of credit are used for about 25% of projects that cost $50,000 or more, versus around 5% for projects less than $10,000.
“This could be a favorable time compared to the last couple of years,” Will said.
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