Once people realized they’d be home for the duration in 2020 due to the pandemic, the popularity of remodeling spiked, and costs for many projects ballooned as demand increased and supply logjams multiplied.
Some projects saw prices increase by more than 50 percent compared to 2019 levels, and the average spending on a remodel went from around $9,000 in 2019 to more than $13,000 in 2020, according to Mischa Fisher, chief economist at Angi and HomeAdvisor. HomeAdvisor’s 2021 True Cost Report highlights how some projects saw bigger price spikes than others, but costs went up for nearly every kind of update last year.
“It was a pretty significant pivot,” Fisher said. “Costs went up, project sizes got larger, people chose to spend more.”
What home improvement projects were most popular and which increased the most in price?
Homeowners in 2020 were focused on making their properties suit their new pandemic lives better. The most popular projects were repainting, bathroom remodels, flooring, landscaping and kitchen remodels.
One factor driving prices higher was the collapse in home listings as people stayed put and shied away from having prospective buyers view their property during the pandemic.
“If you’re looking for something more or different, it was difficult to find an option by changing addresses to a different home because the inventory was so tight,” said Paul Emrath, vice president of survey and housing policy research at the National Association of Home Builders.
“Practically every kind of project got a boost, including creating home offices and exercise rooms,” Emrath added. “But more than that we saw the traditional things people try to work on when they improve their homes: kitchen and baths.”
Painting was the most popular project in 2020, and benefited from relatively stable costs compared with 2019. Meanwhile, new cabinet installation saw the largest increase in cost last year, with prices 56 percent higher than they were in 2019. That may help explain why the cost of total bathroom remodels went up 13 percent last year, and kitchen remodels saw an 8 percent rise, according to Angi’s data.
What caused renovation prices to spike last year?
High demand and strained supply chains were the key issues that affected construction costs in 2020.
“We’ve got increases in material prices, lumber is the one that’s gotten the most attention, but it’s really extremely broad-based,” Emrath said. “Copper wiring, steel, tile, whatever it is, prices are going up.”
He added that labor shortages are compounding those rising material costs, and that these trends are likely to hamper the building industry for some time.
Fortunately for homeowners, not all projects are seeing major price increases, and plenty of home updates can be made without breaking the bank.
“Painting for example was the top project, but it only went up about 1 percent because there weren’t the same shortages with paint,” Fisher said. For comparison, he added, “you have a lot of variables when it comes to installing kitchen cabinets,” because they can use a wider array of materials and require more supplies to fabricate. With more inputs, Fisher said, there are more chances for prices to increase.
What should homeowners know before starting a renovation?
“Be prepared for possible sticker shock and the process taking a little longer than usual,” Emrath said. With material costs increasing and supply chains still under pressure, patience and flexibility are more crucial than ever when embarking on a remodeling project.
“Be aware of the rising trends in all the costs of the remodelers for the contractors,” he said. “It’s not just them being greedy and trying to drive up their profit rate, their costs are all going up as well.
Fisher said it’s also extra important to plan your project well in advance, and to hire reputable contractors.
“The top advice I have is to plan ahead. You want to make sure that you are not trying to change the project midstream. That’s expensive for no reason,” he said. “The second thing, a very close second, is focus on the quality of your pro. All of this stuff is irrelevant if you have a bad pro.”
How to finance a renovation
There are many ways to pay for a big remodeling project, but probably the most popular is to tap your home equity.
“House prices are going up, there is equity in the home,” Emrath said. “Interest rates are favorable and you can still deduct them in most cases on your taxes, so that made it easy to tap into equity.”
Homeowners can utilize their equity through cash-out refinances, home equity loans or home equity lines of credit (HELOCs). Check out Bankrate’s guide to these three products to figure out which is best for you.
The pandemic, in some ways, fueled a home remodeling renaissance, despite increasing prices and longer construction timelines. Fisher said these trends are likely here to stay, and may reflect a bigger shift in the way people think about their homes.
“It used to be fixing damage, decay, repair or to get a return on investment to your house,” he said. Now, homeowners are increasingly recognizing that their property should be made to suit their needs. “The home is a versatile place, it has to serve all these functions–it’s not just an asset you buy to try to get a return on in three years.”