Materials and labor won't be any more affordable in a year or two.
Homeowners who have decided to hold out for price cuts before starting that remodeling project might have a long wait. Remodeling costs may be attractive at the moment, but they're headed upward. While rising interest rates and a weaker dollar could play a role, the biggest factors will likely be supply and demand, particularly of labor and materials.
Demand for remodeling began to surge in 2012, and while expansion fell slightly during the first quarter of 2013, according to the homebuilders associations, nearly every forecaster understood that as a temporary glitch. Consumer surveys are telling the building industry that a very high portion of homeowners will be spending money on renovating in the near future.
More remodeling means more demand for labor, which is already helping to swing the pendulum in favor of workers. After the last decade's housing boom came to a screeching halt in 2008, legions of carpenters and other tradespeople either retired or left for other industries. Now that work has picked up, there's a shortage. In fact many companies are competing hard for labor, and workers who possess the skills needed by professional remodelers are commanding higher wages.
The supply and demand gap also applies to quality subcontractors such as electricians, plumbers, and drywallers. Because most of these subs work on new homes and remodels, an uptick in new construction has brought many of them more work than they can handle. After years of low profits, it's no surprise that they have raised their prices accordingly.
Labor isn't the only challenge: the next few years should also see higher material costs, and for similar reasons. Lumber shortages drove prices higher in early 2013 , and while remodeling projects as a rule use less framing lumber than new homes, the fact is that lumber is a bellwether: the costs of other building materials, from cabinets to carpet to light fixtures, tend to follow its lead.
There are several reasons why lumber prices will remain volatile. A lot of mills closed after the boom ended, and the survivors couldn't keep up with demand when the market began to rebound. It will take time to bring the needed capacity online. Other challenges include less harvestable lumber and more global demand. Mountain Pine Beetles have devastated millions of acres of timberland in the western Canada and provinces have ordered permanent harvest reductions from healthy forests. Meanwhile China, India, and other countries are bidding up prices for what is available.
Rising costs mean that budget-conscious homeowners may have to be creative. One solution is to work with the contractor on value engineering, which seeks to economize without sacrificing amenities or quality. There are innumerable ways to do this, but one example is reducing exterior wall space on an addition. Exterior walls cost more to build than interior walls, so reducing them will save labor and materials. The ability to value engineer is one of the many benefits of working with a professional remodeling company.
The bottom line is that waiting for prices to come down is a roll of the dice – with odds of winning that are probably less than those at a Vegas casino. Anyone considering a remodel in the near future would be well advised to start sooner rather than later.
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