Home Reno Woes...?
Have You Given Up On Your Home Renovation Project?
One result of the past two years when we were all hunkered down in our homes has been the opportunity to really look at how your current home works for you and your family. Changed lifestyles that included remote work environments, home schooling and eating in much more than many of us have in the past gave rise to rethinking how our residence works for us, and ultimately, what changes we needed to make in our household serve us into the future.
If you are one of many who began making plans to renovate your abode, you have no doubt experienced what some experts are saying is leading to the decline in renovation projects across the country. Since 2018, the United States has seen a shortage of tradespeople available to complete projects like kitchen remodels, bathroom remodels, flooring and electrical work. In addition to this, the supplies that they need to complete their jobs—including wood and metal–aren’t available due to a shortage of materials, created as a result of the Covid-19 pandemic, so supply prices are skyrocketing.
This not only affects your home renovation but new construction as well. According to CNBC, prices of new and existing homes are at record levels, and the increases are accelerating at the fastest clip in over 15 years. Nearly half of all builders say they are adding escalation clauses to their sale prices to protect them against rising material costs, according to a recent survey from the National Association of Home Builders (NAHB). A broad mix of residential construction materials is up in aggregate 12.4% over the previous 12 months, according to the producer price index.
Combine rising costs with a labor shortage and you have the perfect storm. Construction employment stalled in April 2021 and fell below its pre-pandemic peak, according to the Bureau of Labor Statistics. According to Adecco, the world’s second-largest human resources provider and temporary staffing firm, an estimated 31 million baby boomers who were working in the skilled trades were expected to retire by 2020 and not be replaced. According to the National Electrical Contractors Association, 7,000 electricians join the field each year, but 10,000 retire.
Like builders, many consumers have found that while we now have more time to think about improving our homes, a trade labor shortage that has been impacting the industry for several years is making home renovations take longer to complete (or become simply impossible to complete altogether) and cost more money than usual.
Supply-chain issues are also filtering down into all the things that go into a home. “Builders are also reporting difficulty obtaining other inputs like appliances,” according to Mike Fratantoni, chief economist for the Mortgage Bankers Association. “These supply-chain constraints are holding back a housing market that should otherwise be picking up speed, given the strong demand for buying fueled by an improving job market and low mortgage rates.” Locally, we have been hearing of people waiting up to a year for high end appliances because of parts shortages.
Despite the labor and materials shortages and increased costs for remodels and upgrades, home improvement projects have persisted, and at a rate that is higher than ever according to some. In fact, researchers at Harvard University found that 2020 was a record-breaking year for home improvements: Americans spent nearly $420 billion on home improvement projects. And 2021 proved to be no different, with no signs of home improvement spending decreasing any time soon. The recent Leading Indicator of Remodeling Activity (LIRA) report from Joint Center for Housing Studies of Harvard University found that “homeowner improvement and maintenance spending are set to remain elevated through 2022.” Having been required to stay inside for so many months, Americans are deciding that having a functional, comfortable and livable home is a top-priority—even in the face of sky-high material costs.
Bill Darcy, the CEO of the National Kitchen and Bath Association, or NKBA, said that from his research, most people have actually enjoyed spending so much time at home and plan to continue to, compared to what they would have done pre-Covid-19. Because of this, they’re willing to invest more in their home improvement projects to make them more luxurious and elaborate than they once felt they wanted or needed. Most individuals used funds previously allocated to travel, entertainment and dining out on home improvement projects, which shows a clear shift in financial priorities.
When it comes to homeowner’s ability to do renovations on their homes, the labor and materials shortage, in conjunction with the Covid-19 pandemic, has really been make-or-break. While to some degree, the statistics suggest that renovations have continued on, and were even more elaborate than once planned, there are many others who had big plans that were quickly crushed. Where do you fall in this equation?