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Rising costs slow home improvement projects after record year

Homeowners who have dreamed of home remodeling for the past year have begun to rethink their options as they face inflation and rising interest rates, according to Des Moines metro home renovation experts.

“I’ve heard it rumbling,” said Jean Jones, owner of the Eastside Lil Brother Construction. “When I get a quote, some people say,’Maybe I’ll postpone it.'” Let’s wait a bit for that. “” Maybe next year we’ll do this project. ”

In the middle of a busy year, Jones said he also encountered clients who suggested “creative” ways to save money, such as whether they could handle the non-technical parts of the project themselves. ..

“‘Can you (disassemble) yourself?'” What can you do to reduce costs? “” We are flexible, “she quoted the client.

The obvious slowdown was when home workers decided to improve the environment they were spending a lot of time on due to the COVID-19 pandemic after home remodeling began in 2020 and 2021. happen. The business was so good that home refurbishment retailers Lowe’s and The Home Depot hit record highs on December 10, 2021, at $ 261.38 and $ 405.40, respectively.

In 2021, more than half of the approximately 70,000 homeowners surveyed by online design and construction resource Houzz undertook some of the highest levels of renovation in four years. Studies show that the amount spent on upgrades increased by 20% within a year, with households spending a median of $ 18,000 on all projects.

According to a Houzz survey, momentum continues into 2022, with 55% of those surveyed wanting refurbishment and nearly half, 46%, planning at least refurbishment.

Houzz staff economist Marine Sargsyan said homeowners are “clearly committed to investing in homes, despite rising labor and material costs.”

more: Rebuilding America: Family Undertakes Home Projects During Pandemic, Boosting Local Home Services

But as project prices and labor costs continue to rise, homeowners are becoming more cautious, said Aaron Pirner, owner and CEO of Wichita, Kansas-based CAPCarpet Inc.

“They are still repairing their homes. Home activity is still good, but it’s not the best of four years,” Pirner said. “We’ve had two years of injections and a big blow to our business. Unless we’re back in the blockage, I think that era is gone.”

Painting the house brings the greatest joy

The May US Producer Price Index provides strong evidence of why contractors and home refurbishers such as Jones and Pilner are slowing down. From May 2021 to May 2022, the latest figures available show that prices for construction materials such as wood and concrete have risen 18.2% and costs for construction services have risen 14.9%. Even simple items such as screws and bolts have increased by 21%.

Deborah Thompson, a colleague of Pirner and regional manager of ProSource’s showroom, admits that businesses are likely to cool down from last year’s overheated levels, but said they are still strong.

“None of us have a crystal ball, and certainly there are some things on the horizon that don’t seem great,” she said. “But your home is where your heart is. It’s still a place to spend.”

So, if you’re still keen on renovating your living space, what’s the best project to undertake? Does it generate both high satisfaction and positive return on investment?

The American Real Estate Agents Association and the American Remodeling Industry Association considered the question in an analysis published in April of a series of surveys conducted by them and the HouseLogic.com website.

For most of the projects asked in the survey, the association was able to establish the median price paid and the rate of return on investment that homeowners could expect when a home was sold. The National Association of Real Estate Agents has also devised a 10-point index called the “Joy Score” based on the satisfaction expressed by homeowners in the completed project.

Among the relatively low-cost projects with the highest return on investment and a 10-point joy score was the refinishing of hardwood floors. The study cost an average of $ 3,400 and yielded a rate of return of $ 5,000 (147%).

With the new hardwood floor, another Joy Score 10 pointer cost more at around $ 5,500, but earned 118%. This is about $ 1,000 more than the cost.

By comparison, a much more expensive project (adding a new bathroom for $ 80,000) had a rate of return on investment of 63% and a joy score of 8.5.

Nothing has a higher overall joy score than painting, the ultimate DIY project. Not only did they get the perfect 10 points, but 88% of the survey participants said they had a “strong desire to go home after completing the project” and gave 85% a “great sense of accomplishment.” increase.

Houzz calculates that homeowners spend $ 1,850 to $ 4,400 to paint the exterior walls of their homes and $ 400 to $ 840 to paint interiors.

Still, keep in mind that even such a simple upgrade can be a costly proposal in 2022. On February 1, Sherwin Williams replaced the temporary supply chain surcharge of 4, raising the price of internal and external building paints by 12%. % Activated in October 2021.

For those who are budget-conscious and still want to make a difference, Houzz recommends a simple outdoor project. “You don’t have to spend a fortune on new landscaping to make an impact,” said Sargsyan of Houzz.

Popular outdoor projects in the site’s 2021 survey included flowerbed and border, lawn and fence upgrades.

“We can also see homeowners decorating their outdoors with new lighting, furniture, fire protection and floor coverings,” says Sargsyan.

You can see a slowdown even at the discounter

Other external projects with the highest pleasure score of the National Association of Real Estate Agents include the installation of new windows and entrance doors.

Renovators looking for these items and other budget sources can check the ever-changing inventory of new and used home refurbishments and building materials at two ReStore retail centers in the Des Moines area.

The 2200 E. Euclid Ave. and 4033 NW Urbanale Drive, operated by the non-profit Greater Des Moines Habitat for Humanity, stores home refurbishment materials donated by residents and contractors that are sold at discounted prices from market prices. increase.

Dana Folkerts, Des Moines’ vice president of retail operations, said the store’s business has slowed since the 2021 record, just like any other home refurbishment retailer.

The remodeling season got off to a strong start, Volkerts said. “March and April were very good months for us,” he said.

more: Rising interest rates could add hundreds to your mortgage invoice. Here are five tips to keep your billing low.

But between May and June, he said, “there were no major purchases where people made major modifications and replaced floor bundles.”

It is less affected by inflation, despite the fact that all of Restore’s inventory is due to donations.

“We want to respect donations of something and set prices accordingly,” says Folkerts. “We haven’t adjusted the set of prices to explain inflation.”

Nevertheless, Restore inventory flows are unaffected by market pressure. One of the current examples is the lack of donated kitchen cabinets, which is a very popular item among Folkerts customers.

His team runs a free program to send ReStore staff to a house under renovation, remove cabinets and sell at ReStore.

“Everyone is waiting for a kitchen remodeling. Everyone is waiting for a cabinet for a very long time, and that has influenced our donation flow,” Folkerts said.

“The biggest real struggle is the appliances used and donated. I don’t know what the difference is. Maybe people are replacing them so often?” Volkerts said. .. “I can’t see enough people coming in.”

Industry experts agree that the kitchen is the most popular space to undergo remodeling, but it is often a costly and time-consuming process. In 2021, Houzz recorded a median investment in kitchen upgrades of $ 15,000, up 25% from the previous year. The average time spent planning the kitchen makeover was 8.6 months, with 4.9 months reserved for construction.

Lil’Brother’s Jones has found that homeowners who choose to invest in large-scale home remodeling projects are less willing to do so.

“Surprisingly, we’re still doing a lot of kitchen and bathroom mods, but I think they’re the people who planned and budgeted for these projects,” she says. I did.

It all comes down to choice

Jones is concerned that demand could decline further if customers need to be informed of rising economic pressure on the company.

“Gas prices are affecting everyone and everyone has to bear the cost. We haven’t passed on gas prices to consumers. But if that continues, I We’ll have to bump, “she says. she said.

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Pilner said it may be up to the customer to choose the best way to spend the ever-growing dollar. He said he believed they were worth the investment in home improvement, especially when compared to unnecessary spending such as vacation trips.

“I think our customers are much happier to repair their homes than to travel now, and they will get much more value for their money,” he said. ..

Richard Lane is a real estate reporter at The Des Moines Register. He can be contacted at rlane@registermedia.com.

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