In the aftermath of years marked by substantial double-digit growth, expectations for expenditures on improvements and repairs to owner-occupied housing are slated for only modest expansion in 2024.
This downturn, as outlined, is attributed to several factors, including a cooling housing market, the upward trend in home prices, mortgage refinancing, the current economic climate, and the looming specter of a recession.
But what implications does this have for homeowners and contractors? Is it an opportune moment for renovations?
We delved into this matter by consulting with our resident experts to provide you with comprehensive insights.
As we are all acutely aware and possibly fatigued from discussing, the Covid-19 pandemic reshaped our lives in unprecedented ways. One significant impact was the increased time spent within our homes, prompting homeowners to reassess their living spaces. The extended periods of quarantine led to a surge in do-it-yourself (DIY) projects across Canada.
The substantial changes induced by the pandemic in housing and lifestyle decisions fueled a 13.8% increase in remodeling and repair spending from 2022 to 2023, a figure slightly below the initially estimated 22.5%.
During this period, a multitude of homeowners seized the opportunity to tackle DIY home improvement projects, ranging from painting walls to building shelves, undertaking small renovations, or embarking on full-blown remodels. The surge in spending was further exacerbated by shortages in labor and materials, causing a notable inflationary impact on prices, with project costs escalating by 20% to 35%.
Expert Opinions on Spending Projections
Despite the forecast indicating a sharp drop in home renovation spending rates from 16.3% to 2.6% in the upcoming year, our experts remain cautiously optimistic. In the current era of unpredictability, Daniel Varzari, Evertrust Construction Home Expert and General Contractor, expressed skepticism about such a dramatic decline, emphasizing the unique economic circumstances.
Varzari remarked, “That’s a pretty steep decrease they seem to be expecting. I would have a difficult time believing something that dramatic will happen. However, these are unique times with a strange economy. It’s anybody’s guess.”
The anticipated decline in renovation spending is deemed contingent on numerous factors, with location emerging as a significant influencer, according to our experts. Varzari emphasized that their construction business, situated in Ontario, continues to receive a steady stream of inquiries, suggesting a resilience in demand for renovations.
Prospects for Renovation and Material Prices
With the housing market cooling and economic uncertainties prevailing, the question arises: will renovation and material prices witness a decline? Varzari acknowledged the traditional trend of material prices decreasing during slowdowns, but he emphasized the current unpredictability in the market.
“While there’s a slowdown, material prices decrease. But again… weird times. We’re seeing inflation almost across the board, so prices that typically would drop significantly may or may not see much movement at all until the bigger picture is more clear,” Varzari stated.
Nonetheless, there are signs of the materials shortage gradually rectifying itself, with certain items returning to more normalized pricing. Regarding contractors lowering prices, our experts caution against expectations, noting that established and reliable contractors are likely to weather the decline in demand without compromising their pricing.
Is Now the Right Time to Renovate?
Considering the evolving landscape, the pivotal question emerges: is now a favorable time for home renovations? If so, which projects should homeowners prioritize?
Both Varzari and our other expert concur that the current climate calls for pragmatic decision-making when it comes to home renovations. Budgetary considerations are paramount, especially given the economic uncertainties and fluctuations in renovation dynamics.
“Bigger projects, such as additions, have become too costly for many homeowners over the last couple of years, due to higher home renovation costs. We are also seeing homeowners who have very healthy budgets but unrealistic wish lists,” Varzari pointed out.
In this climate, our experts advocate for prudent budgeting and focusing on smaller, essential projects. Varzari recommends repurposing existing space within homes and postponing major projects until the economic landscape stabilizes.
“If you’ll be in your home for a while and want to remodel, put off the big projects until this whole economy shakes out and focus on smaller projects that you can pay cash for, or supplement with a small signature loan or low-interest card,” Varzari advised.
In conclusion, while the predicted decline in home renovation spending remains uncertain, homeowners are encouraged to exercise prudence in their renovation decisions. The prevailing economic conditions underscore the importance of mindful budgeting and prioritizing projects that enhance immediate comfort and functionality within the home. By adhering to these principles and collaborating with reputable contractors, homeowners can navigate these uncertain times and make informed and impactful renovation choices.