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Homeowners pause renovations as costs get ‘just ridiculous’
Americans are postponing their home renovation plans and opting for more affordable options in a context of high financing costs and a recovery in the housing market that has not yet materialized.
Two of the nation’s top home improvement retailers reported this month that consumers are spending less on expensive projects that often require loans and trading in more affordable do-it-yourself solutions.
HomeDepot (High definition), for example, said high-value transactions over $1,000 were down 6.5% compared to the first quarter of last year.
“We continue to see softer engagement on larger discretionary projects, where customers typically use financing to finance projects like kitchen and bathroom renovations,” William Bastek, executive vice president of merchandising at Home Depot, told investors and analysts on the conference call of the company’s first quarter results. .
Lowe’s (LOW) said this week that consumers are moving away from purchasing multiple items to purchasing single items, putting pressure on comparable sales, which fell 6.2% in the quarter, as homeowners continue to delay larger discretionary projects.
This differs from the early days of the pandemic, where ultra-low interest rates boosted home sales and renovation spending. But today rates have soared, causing more homeowners to remain in their homes.
This means consumers are delaying larger investments in renovations to increase the resale value of their homes.
And owners are cutting costs wherever they can. A quarterly survey from John Burns Research and Consulting published in late April found that among those renovating their homes, customers are looking for cheaper alternatives in categories such as cabinets, flooring, lighting fixtures and countertops.
“These downgrades are becoming more common among cost-conscious consumers,” Matt Saunders, senior vice president of building products research at John Burns, told Yahoo Finance.
Total spending on home renovations and repairs is expected to fall more than 7% in the third quarter of this year, to $451 billion, according to researchers at Harvard University’s Joint Center for Housing Studies. Leading Indicator of Remodeling Activity showed.
“Homeowners have been hurt by high costs,” said Abbe Will, associate project director for the Remodeling Futures Program, part of Harvard’s housing think tank. Yahoo Finance this week. “Certainly, inflation is as high as it has been throughout the economy [and] more broadly, it has been even more extreme in construction materials and skilled labor costs.”
Tim Poterek of West Branch, Michigan, is among the many homeowners who are reevaluating their renovation plans. Poterek dove into remodeling and DIY projects during the pandemic. Since then, he has chosen to be more cautious when spending on home improvements.
The story continues
“Replacing anything these days is just ridiculous,” Poterek told Yahoo Finance in an interview. “You’re paying high prices for lumber, interest rates on credit cards, loans, things like that.”
Poterek is fixing your shower. He originally wanted to replace it, but the cost was out of his budget. Instead, he has been using DIY Facebook groups to help him fix his shower.
“I will take photos and publish them. I usually get great ideas and great feedback,” Poterek said.
Tim Poterek trying to figure out what to do with his shower. He posted in a Facebook group asking for suggestions. (Courtesy: Tim Poterek)
With help from experts and other DIYers whose suggestions ranged from removing screws to cutting out the bulge in the wall, Poterek was able to think creatively about his options.
“To repair [the shower stall]It will probably cost me around $25 to $30, thanks to the people who offered me some suggestions,” Poterek added.
Many homeowners have responded to higher financing costs by pausing or postponing projects to a later date, about 36% of consumers reported, according to John Burns, while 30% of consumers are spending less on remodeling projects.
“Remodeling is being hampered by the COVID cohort shock to remodeling, where a lot of remodeling activity was carried out in a very short period of time. This is just now happening in the system,” Saunders said.
The slowdown in renovations may not last long, according to some industry experts.
Data National Association of Home Builders showed that remodeler confidence fell slightly in the first quarter of this year, with the index measuring current conditions remaining unchanged for projects of all sizes and the index measuring future activity – the arrival rate of leads and inquiries and the backlog of jobs – also remaining flat. Still, the overall index shows that more remodelers view remodeling market conditions as good than bad.
“Demand for renovations remains solid, especially among customers who do not need to finance their projects at current interest rates,” said NAHB Remodelers President Mike Pressgrove, a remodeler from Topeka, Kansas.
There are also potential catalysts that could spark more home improvement activities.
“We are seeing an increase in household wealth, which is a strong leading indicator for large discretionary model projects,” Saunders said. “We believe that in the second half of the fourth quarter of this year we will start to see remodeling pick up again.”
“Half of homeowners today live in homes that are at least 40 years old and that in itself is really helping to drive a lot of the replacement spending that has been happening and that we continue [to see] this year too,” Will said.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.
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