Home Renovation Spending Predicted To Drop By Nearly 14% From 2022 To 2023 (2024)

As we’re all painfully aware, and probably are tired of talking about, the Covid-19 pandemic shifted our lives in many ways that we’ve never quite experienced. One of those ways was having to spend more time in our home than we ever intended to. This caused the home to be more top-of-mind for most of us. Spending so much time inside had many homeowners thinking about all of the parts of their home that they didn’t like, that weren’t functioning at their best or that they just straight up wanted to re-do.

That, coupled with the endless amount of unoccupied time homeowners experienced during quarantine, quickly sparked a DIY craze across America.

Abbe Will, Associate Project Director of the Remodeling Futures Program, was quoted in LIRA stating, “The massive pandemic-induced changes in housing and lifestyle decisions fueled remodeling and repair spending in 2020 and 2021, growing 23.8% over these two years compared with the 12.5% originally estimated.”

Many homeowners were taking advantage of their mandated time at home by taking on DIY home improvement projects that otherwise may have been left to the professionals. Whether it was painting walls, building shelves, making small renovations or doing full-blown remodels, you’d be hard pressed to find an individual who didn’t take on some sort of home improvement project between 2020 and 2021.

Labor and Materials Shortages and Their Effects

Not only were more people doing home improvement projects during the time between 2020 and 2021, but this drastic increase in spending was also due in part to the fact that the labor and materials shortage was causing a steep increase in price for items like lumber and other home improvement materials. Projects that were once affordable were now costing upwards of 20% to 35% more. So, spending increased because while more people were doing work on their homes, projects were also costing a lot more.

In regard to LIRA’s prediction of home renovation spending rates dropping from 16.3% down to 2.6% over the next year, our experts didn’t seem too concerned. They both stated that in some ways, we’re still still very much living in these unprecedented times, where nothing is as predictable as it once was, and they anticipate that this drop is a reflection of that uncertainty. Deane Biermeier, Resident Forbes Home Expert and General Contractor, shared his skepticism about the statistic.

“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,” stated Biermeier.

For Derek Walczak, Forbes Home Advisory Board Member and Owner and General Contractor at Walczak Design + Build, business continues to boom.

“In regards to home renovation decreasing in 2023, from a personal standpoint, we are currently booked through the end of the year, and inquiries are continuing to come in. Will this change going into 2024? It could, but I think from a business standpoint that location, type of construction [or] remodels [that] a company tends to do, and who that company caters to will play a large role,” Walczak told Forbes Home.

“We are located on the North Shore of Massachusetts where housing and construction costs are high, but there is also an abundance of clients with the financial resources and stability to keep building. Currently, we are still receiving an abundance of inquiries for renovations in homes that have been purchased with the intent to renovate over the past couple of years.” Walczak continued. “Obviously, this was driven from the lack of inventory on the housing market. We are also seeing a lot of homeowners that have owned their home for longer periods of time and now have built up the equity or savings to invest in renovations.”

So, the predicted decline seems dependent on a majority of factors, with location being a major influence, according to our experts.

With the housing market cooling down and the general state of economy, we’d expect to see a general decrease in spending, but what about renovation and material prices? Are they expected to drop? Will contractors who are seeing a decrease in demand be more flexible with their pricing? Here’s what our experts have to say.

“Whenever 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,” Biermeier told Forbes Home.

That said, our experts are seeing the materials shortage starting to slowly correct itself, and we may see prices for specific items return to a more normal rate.

“I don’t think we will see a drastic drop in building materials outside of the usual seasonal fluctuations. However, this is also product-specific. I do think attaining materials such as doors and windows will become easier; we are already seeing shorter lead times,” said Walczak.

As far as contractors lowering their prices, our experts say, don’t hold your breath. Well-established and reliable contractors and companies should have no issues surviving this predicted decline in demand, and any that are struggling, well, there’s likely a reason for that.

“Typically, in the construction industry, established companies have been able to weather some pretty huge downturns. 2008 was a great example. When remodeling demand drops, bigger companies are better equipped to ride it out while smaller contractors often fail,” Biermeier said. “I don’t recall many larger remodelers substantially lowering prices to sell a few more jobs. Usually, at least it seems, they’re content with a less demanding schedule for a time.”

Echoing Biermeier’s thought, Walczak told Forbes Home, “I think the established companies that are good at what they do and have built a reputation should be able to keep building…For homeowners, I would be wary of contractors that are flexible with pricing as this usually leads [to] something being left out or steps missed. My advice for homeowners would be to find a company that you trust and can provide ballpark costs up front. Make sure that the scope of work to be completed is clear and in the contract, and ask what is included as well as what is not.”

With all that in mind, is now a good time to take on home renovations? And if so, what projects should homeowners prioritize now? Our experts agree that now’s the time to do what you need to do to make your home comfortable—without going overboard.

Budgeting Is Crucial

“What we have found is that bigger projects, such as additions, have become too costly for many homeowners over the last couple of years, due to higher building costs. We are also seeing homeowners who have very healthy budgets but unrealistic wish lists,” Walczak told Forbes Home.

Both of our experts agree that when it comes to renovating right now, making a budget and sticking to it is key. With the uncertainty of the economy, and the oddities in the realm of renovation, this is really not the time to splurge, and this mindset could be an explanation for the drastic spending decrease that LIRA predicted.

“I can’t overemphasize that establishing a budget and your goal is the most important first step. How will this renovation or additional space improve the functionality and beauty of your home? From there, you can make two lists: a must-have and a dream list. Your budget will quickly drive what aspects of your project you can afford to do,” added Walczak.

Smaller, Necessary Projects Win Out

“It appears that higher mortgage rates are going to stick around for a little while. If home prices drop enough that folks decide the higher cost of borrowing is worth it, they could start buying again,” Biermeier said. “My advice is 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. After all, if you’re there for a while, you might as well be comfortable. If you can support your local small contractor business, that’s even better.”

Similarly, Walczak said, “Right now I would recommend projects that repurpose and utilize existing space within your home. As a builder we love additions and new builds. However, these costs add up fast. You may be able [to] better utilize space that already exists and stay within budget. I do think it’s a good time to renovate. We always say that the best time to renovate is when you’re ready to renovate. Have a clear picture of your needs, budget and what you’re getting for your investment.”

Bottom Line

There is really no way to know for sure if home renovation spending will drop as low as LIRA is predicting it might. However, hopefully this provides you with enough information to decide for yourself if now is the right time to renovate your home, and if so, what projects to prioritize. Above all else, now is the time to keep your home renovation budget top of mind, and to make sure the projects you’re choosing to put money into now, will benefit you and your home in the immediate future. By keeping that in mind, and by always choosing to work with a reputable contractor, you’re sure to make good, safe and impactful home renovation decisions.