What Does Inflation Mean For My Remodel Project?
Aug 19, 2022
It is no secret that inflation has wreaked havoc on everything from grocery bills to airline travel. But what have the inflated prices done to the remodeling industry, and how does that impact your own home remodel?
We are here to tell you that inflation does NOT mean you should postpone your remodeling plans - in fact, there is a strong case to be made that now is the ideal time to remodel for a myriad of reasons. Read on to discover these reasons, and access our simple inflation-battling remodel checklist!
What is inflation, and how does it affect remodeling?
In order to create a plan of action for remodeling in today's economic climate, it is important to understand the issues at hand.
Inflation is an increase in the price of goods and services over a period of time. Inflation causes a loss in buying power. The same dollar buys less and is therefore worth less. You are not able to make your money go as far as it once did.
Inflation is not abnormal, and when occurring a low yet steady rate it is indicative of a healthy economy. But when inflation starts to rise quickly it can cause significant issues.
In terms of a direct inflation to remodel correlation, on the front-side you'll notice inflation impacting material and service costs. A topical example that was all over the news this year was the staggering price increase in lumber. Thankfully, those prices are starting to level - but material costs as a whole are definitely still at a substantially higher rate than they were even one year ago.
It isn't all doom and gloom. Wealth strategists agree that real property actually does well in periods of rising inflation. Because physical assets, like your home, have intrinsic value - they are sold and priced in markets that buffer the typical negative impacts of inflation. The return on investment for a remodel can actually keep up with or even surpass rates of inflation. (businessinsider.com) So the prices for your remodel itself may be higher due to higher cost of labor and supplies, but your return on investment will stand up to an inflated market.
Understanding Return On Investment (ROI)
High inflation or not, Return On Investment (ROI) is a key marker to pay attention to when completing a remodel project.
9 times out of 10, our clients are looking to remodel their existing home or a home they've just purchased to better their personal experiences in the space. While we have certainly worked with homeowners on remodels with the end goal of listing the property, it is much more common to complete projects for families desperate for a home that looks and functions in a way that is more in tune with their day to day life and personalities. Because the motivation for remodeling is so personal, it can be easy to forget ROI and focus solely on crafting a space that checks all their boxes, and their boxes alone.
However, this can spell disaster when you end up needing to sell your home and you are trying to market a house that has purple cabinetry, or an elaborate craft room with a dated kitchen. Your motivations for remodeling can be sentimental - and you can still have your dream craft room! - but you also need to keep ROI in mind and balance both the personal and financial rewards of a remodel project. Perhaps if purple cabinets are your passion, you can create a balance with a purple hued backsplash and a complimentary wood tone for your cabinetry. Or if you have a craft or hobby space in mind, balance the budget to also find room for updates in the ROI heavy-hitters (Kitchen and Bathrooms) so that the financial benefit is equal to the personal ones.
ROI is also always negatively impacted by shoddy craftsmanship and shortcuts throughout the remodel process- so do your homework when interviewing contractors!
Accepting the Current State of the Housing Market
Inventory is low, new build issues abound, and making the best of your current home is likely your best option.
If remodeling material costs and services are higher due to inflation, why not just buy a new house or even consider building?
Let's talk about building first. Those material and service cost jumps are going to follow you there - if these things are even available. In our Fargo/Moorhead region we are seeing a major complication, this time from supply-chain disruptions vs. inflation directly, that is causing 52+ week wait times to bring power to new homes. That means you're looking at 2023 at the earliest for power to a new build! (read more here)
Buying a new home might seem like a tantalizing alternative to remodeling, however inventory is low and interest rates are high - not exactly the ideal combination for embarking on a new home purchase.
That leaves remodeling - an option that when done right can make a dated, less-than-ideal floor plan feel brand new. Whether it is opening up the kitchen, transforming a master suite, adding a work-from-home office or finishing that basement with all of its potential - a home remodel can be as impactful as a new build in terms of transforming your life inside it.
By working with a contractor that also offers a design team, you can take the dreams you have for your home and apply them in real, practical ways that allow you and your family to truly enjoy your spaces. And you won't be waiting over a year for electricity to do it!
Family Well-being > Inflation Woes
Making your home a retreat from the stressors of day-to-day life is the biggest positive return you can ask for.
With the constant influx of negative news (even downright terrifying news) via television, social media, and the internet - having a home base that feels like a retreat from the stressors of the world is more important than ever. We live in a time when all of the information is accessible all of the time, something that can be a positive in certain contexts and unbearably overwhelming in others.
Having spaces at home where your family can come together is more important than ever. That can look different for different families. Perhaps a large open space with comfy carpet in the basement for playing toys with your toddlers that can evolve into a hang out space for teens is what you're looking for. Maybe it's a TV room right off the kitchen for hosting beloved friends and family for the big game or movie nights. Or it could be a spa bathroom space for adults to take a breath, recenter, and be ready to face another day refreshed.
You can take that element of creating a safe-haven up a notch by having your home be physically safe from toxins and indoor pollutants via a Green Remodel that creates systems in your home that improve the indoor environment and lower utility bills.
No matter what a retreat space looks like for you, your home should be the place that plays host to it. Because it is your space and yours alone - the place where you and your loved ones can gather and be together.
Remodel Must-Haves for Any Economic Climate
These are ESPECIALLY key when dealing with inflation - click here to download your checklist now!
- Fixed Price Contract: You will always want a contractor to be up front with you about the price of your project. Being hit with unexpected price jumps mid-project is one of the biggest fears homeowners have in tackling a remodel. A Fixed Price Contract eliminates this potential nightmare - and is even more crucial in the midst of inflation.
- Financing Assistance: A contractor that can not only provide insight and advice regarding financing your project is a major benefit - and one that connects you directly to financing options is an even bigger pro.
- Experienced Team: As we learned earlier in this article, a positive Return On Investment IS possible even in an inflation-prone market. But cut corners and shoddy end-results will never positively benefit the financial position you have in your home. Make sure your contractor has a trusted team behind them.
- Proof of Quality: Asking a multitude of questions up front allows you to trust the process and eliminates stress. Where are the cabinets sourced from? How do they apply coatings to the walls or refinished cabinets? What experience does their design team bring to the table? Make them prove the quality from the beginning so you can enjoy a quality result in the end.
- Strong Communication: You want reassurance at any point of your remodel - especially in a tumultuous economic climate. Make sure your contractor has a simple way to connect with them from day one to day done.