Homeowners who decide they need to shake things up have two options. They can move or they can remodel their current home.
In this current economic environment, both options are pretty expensive. House prices are near all-time highs and mortgage rates are north of 7%.
Remodeling costs are up for a lot of the same reasons. In addition to general inflation, labor and material costs have surged over the last 18 months.
But if you can put off your home remodeling project until next year, costs could come down. A recent study from the Harvard Joint Center for Housing Studies suggests home improvement spending is declining and will fall even more in 2024.
The center’s Leading Indicator of Remodeling Activity (LIRA) projects that year-over-year spending on homeowner improvements and maintenance will shrink by 2.7% through the first quarter of next year and by 5.9% percent through the second quarter.
If fewer homeowners are remodeling, it stands to reason that contractors will be more competitive to get your business and will also be more available. That trend began in late 2022 and has accelerated this year.
“Home remodeling activity continues to face strong headwinds from high interest rates, softening house price appreciation, and sluggish home sales,” said Abbe Will, associate project director of the Remodeling Futures Program. “Annual spending on homeowner improvements and repairs is expected to decrease from $486 billion through the second quarter of this year to $457 billion over the coming four quarters.”
Choose your contractor carefully
With the decline in the number of homes for sale across most of the U.S., remodeling may be a more attractive option. Costs vary depending on the scale of the home improvement project but some factors are consistent.
According to ConsumerAffairs' Kathryn Parkman, a successful project starts with choosing the right contractor. “It’s all about due diligence,” she writes. “Check the companies’ credibility and ask for examples of past work. Don’t be shy to request references and contact past clients. Review each company’s license and insurance and be sure they provide a detailed contract.”
Homeowners with a lot of equity in their homes may also find it’s easier to finance their project by taking out a home equity line of credit (HELOC). Most lenders will let you borrow up to 80% of your home’s equity.