The pandemic caused a certain kind of disaster in the renovation of the house. The growing demand for construction projects collided with shortages of materials and manpower, creating a traffic jam to improve the house that lasted until 2022.
“The pandemic has played a huge role in everything but housing,” said Abbe Will, deputy director of the Remodeling Futures program at the Harvard Joint Housing Center.
Renovation could be as costly and stressful this year as it was in 2021. With the Federal Reserve expected to increase the federal funds rate several times this year – a move that raises interest rates – financing a renovation may seem even less attractive.
See what difficult renovation conditions mean for home improvement this season and how to prepare.
See also: Construction of new homes improves as builders work through accumulated leave – but face inflationary pressures, labor shortages and rising rates
Expect commissions to remain low
This year, it may be difficult to find a contractor and materials to make a renovation. Once you do, both will probably cost more than before the pandemic.
Workers and materials are in short supply, which plays a big role in increasing costs. Neither issue is expected to be resolved this year, says Paul Emrath, vice president of research and research on housing policy with the National Association of Housing Builders.
The construction industry has a labor problem that preceded the pandemic, Emrath says, but it worsened as workers quit or fell ill and could not work on construction sites for the past two years. This means that even when people return to work, there will still be very few construction workers.
Building materials faced a new problem during the pandemic. The supply chain issues that have plagued many industries have created one unprecedented lack of materials in which all building materials were in short supply immediately, says Emrath.
Lack of materials is the biggest factor for the higher cost of remodeling. Facilitating supply chain problems could reduce costs. However, “no one really expects this to happen for materials in 2022,” he says.
The demand of homeowners can be reduced
The pandemic has sparked “apparent demand” for remodeling projects, which has been growing every quarter since the end of 2020, Will said.
Last year, remodeling spending rose 9% year-on-year and is projected to grow 17% this year, according to Will. The historical average annual growth is about 5%. Will attributes growth to many factors, including home-based workers, overdue projects from 2020, aging homes, nesting new homeowners, and preparing for natural disasters.
However, spending could increase more slowly towards the end of the year, as borrowing against equity becomes a less attractive option. Housing values are expected to rise steadily, rather than skyrocket, which means homeowners will not raise equity as quickly as before. At the same time, Will says the expected Fed rate hikes will raise interest rates on mortgages and credit lines.
“Higher interest rates for homeowners who are interested in raising their own funds or using other financing methods could reduce some of this demand, which in turn alleviates some of this pressure,” Will said.
Related: How to avoid fatigue during remodeling
How to plan your renovation this season
Neither Will nor Emrath see any reason to delay a renovation in the hope that it will be easier or cheaper next year. In fact, Emrath says raising interest rates could be a signal to start a restructuring sooner rather than later if you plan to finance it.
Will’s advice to homeowners who are renovating: Be flexible with your materials and schedule.
“Have a little patience to work with contractors and stick to their schedule and be as flexible as you can when they can start working with you,” he says.
An overdue project could be an opportunity to save money on remodeling. Paying cash for discreet and non-urgent purchases is a better alternative than charging for them, says Jay Zigmont, a Mississippi-based certified financial planner. It is also an interest-free financing option.
If you choose to finance, look for the cheapest lending option, says Zigmont.
At the moment, this can still be equity financing, which often has single-digit annual rates. A home equity line of credit could work well for a changing schedule because you can raise as much money as you need.
Personal loans are available to homeowners with little or no equity. Interest rates range from 6% to 36% – higher than most equity financing, but lower than credit cards for those with strong credit. Loan amounts for special borrowers can be up to $ 100,000.
Zigmont recommends the piecemeal upgrade if you want to see progress this year but do not have enough cash to pay for a complete refurbishment. Start with what excites you most – new appliances or tiles, for example – and think about saving money for the rest.
More from NerdWallet
Annie Millerbernd writes for NerdWallet. Email: email@example.com.