Experts at the National Association of Home Builders (NAHB) state that homeowners will continue with home renovation projects in 2022, but the trend will slow down compared to last year. This was reported by CNBC along with the Harvard Joint Center for Housing (HJCH) Remodeling Futures Program forecast that home remodeling will continue to surge in the first half of 2022 and peak in the third quarter but will decelerate in the fourth quarter. Spending on home remodeling is predicted to reach up to $430 billion from July to December, still a 20 percent increase over the second half of 2021. In the fourth quarter of 2022, spending is predicted to increase by 17 percent over the fourth quarter of 2021. This is a huge difference from the pre-pandemic annual increases that ranged from one to three percent.
Factors Affecting Home Renovation
The Q1 2022 Houzz Renovation Barometer surveyed 1,200 U.S. home improvement firms from January 16 to 24. The Project Backlog Indicator for the first quarter of 2022 has so far reached 11.4 weeks. This explains the difficulty in finding contractors with an available schedule. In comparison, the Project Backlog Indicator for the first quarter of 2021 was only 7.4 weeks.
Despite shortages in materials and labor, the volatility in prices, inflation, and increased interest rates, the Expected Business Activity Indicator based on newly committed projects and project inquiries have already reached 79 in January 2022. In the first quarter of 2021, it was only 74.
An article on Nasdaq states that the stock market’s stability is giving homeowners the confidence to spend on home improvement projects. The increase in the capital gains tax was also lower than expected, and the government continues to give monthly tax credits. These further stabilize homeowners’ perception of the economy. For funding needs, there has been an increasing number of home improvement lenders. Two of these were even recently purchased by Truist Financial and Goldman Sachs. Furthermore, an increasing number of contractors have started offering consumers financing options.
Tips for Homeowners
Homeowners planning a renovation must choose a contractor wisely. Check out the feedback from previous clients. The contractor must be transparent throughout all stages of the project. From the start, the contractor must give realistic estimates on costs, availability of materials, and timelines. There must be real-time updates, especially on unavailability or delays in the delivery of materials. The homeowner must have a say in any necessary switching of materials due to sudden unavailability.
Homeowners must remind the contractor to ensure that nothing in the home is accidentally damaged during the renovation. The homeowner must first move out all furniture from the areas to be worked on and areas where there will be much traffic of equipment and workers. The contractor must ensure that there is adequate floor protection during construction.
The homeowner must determine beforehand if it is realistic to live in the house while the renovation is going on. If not, the expenses for living elsewhere must be included in the budget. There must be an ample margin for possible delays in the project.
Renovation Trends Continue
The trends in renovation projects continue from 2021. The addition of home offices is still widely popular as more and more people are deciding to either work from home full-time or part of the time. For households with children, the addition of study rooms where children can focus properly during distance learning classes is necessary. With Covid-19 continuing to mutate, there is no guarantee when students will be fully back to school or back to distance learning.
As people stay home most of the time, energy bills are rising. To counteract this, home improvement must include energy-saving changes. For instance, insulation and air sealing must be improved to control indoor temperature and lower the cost of heating in winter and cooling in summer. Homeowners must choose energy-efficient replacements if appliances are upgraded, preferably Energy Star certified.
The Value of Home Renovation
The most obvious value of home renovation is the enjoyment of the homeowner. New needs are met, the home is much more comfortable to live in and more aesthetically appealing. In addition to this, whatever amount was invested in the house is not lost. It adds value to the home and continues to appreciate with the house.
If the homeowner eventually decides to sell the house, it will have a much higher selling price. The cost of renovation will not only be recovered, but it will also be profitable. U.S.News cited New York MDG design-build firm architect Michael Mahal stating that there is a huge difference in the selling prices of renovated homes and those that still need renovation. There is a high demand for homes that are ready for moving in because many people do not want to go through the renovation process themselves.