Anticipating Whether Home Construction Costs Are Rising or Falling

If you have considered a home improvement project recently, one of the first concerns that probably has come across your mind is the timing of the project.  The current economic climate is highly volatile, to say the least, and there is great uncertainty about what the future may hold.  The question then becomes, should you try to start your project as soon as possible or consider putting it off to a later date when the future path of the economy is a bit more transparent?  Hopefully, we can address some of these concerns and the factors that affect them to help guide this decision-making process.

Initially, the obvious must be addressed.  The pandemic has essentially ended or entered into its last stand.  This is great news for the majority of industries but does not mean there aren’t going to be great repercussions from what occurred.  Specifically, in the construction industry, every aspect from the supply chain to the workforce has greatly felt the created recession.  Some of these branches will recover faster than others, and many in fact have already shown significant progress.  Still, there are numerous components, both internal and external, to the construction and housing industry that will play a part in remodeling costs and whether they increase or decrease in the coming months and years.

With what seems like ever-rising interest rates, the effect on housing markets is probably what first comes to mind.  The most likely chain of events is that new ground-up housing construction will slow due to the high cost of money.  This will cause many with low fixed-rate mortgages to decide to remodel or renovate their homes instead of trying to upgrade to a new residence.  Since there is less new ground-up construction, material costs should decline and contractors’ schedules will open up, leading to the real possibility of decreased rates in home alteration projects.

The Fed has taken great steps to lower inflation which should hopefully help curb prices throughout all industries, the home improvement sector being no exception.  One of the main ways they have accomplished this is with the Inflation Reduction Act.  This act should help encourage homeowners to engage in construction projects as they will be able to save money through tax credits.  These credits are acquired by implementing environmentally friendly assets into their home construction project such as LEDs or heat pumps.  Doing research about government programs and following methods such as these are excellent ways for projects to be completed at a reduced cost.

Despite the former reasons for why costs could decline in residential renovations and remodels, one of the leading authorities on the housing market predicts that spending in the home construction industry will greatly decrease this year.  This sentiment though is not in line with what many think the reality of the situation is.  In some markets with very affluent clientele and well-established contractors, no decrease in spending has been felt keeping costs up.  In other geographical locations though, slowed spending/demand should lower material costs, but with inflation, it is not known if these decreases will actually be realized.  What most do agree on though is that with there being so many factors affecting the market, it is extremely hard to make a prediction about the direction in which it is going.

So the question still remains, is now the right time for a home renovation or remodeling project?  The consensus is that engaging in a large addition or remodel at the moment may not be the best idea.  What is recommended is smaller renovation projects that get your home into a comfortable state until the economic climate for a larger project is ideal.  Utilize a cost-effective strategy by developing a realistic budget and sticking to it.  Consider renovations of existing spaces as opposed to creating square footage through a large addition.  If possible, employ a project where some of the tasks can be, "do it yourself" (DIY), which will help you stay on track regarding your budget.

Following these recommendations will hopefully allow you to navigate the economic uncertainty of the residential construction market at the moment.  The key takeaway is that the direction of the market is uncertain, so in order to safeguard finances, be very strict in terms of developing your budget so as not to put yourself in an unfortunate position if the economy does in fact take a turn for the worst.

Want more insight into how RessaBuilt can help you transform your home?  Check out the informative articles on our blog, or contact us to get your own home remodeling project started.