A Recession is a Perfect Time for Home Improvement Projects—Here’s Why
The likelihood of an economic downturn has been a hot topic for some time now. In fact, many Americans feel that a recession is just around the corner. And while fears of another financial crisis seem unfounded, even the more cautious pundits are forecasting a mild recession, beginning either in the fourth quarter of 2023 or first quarter of the following year. What, then, does the expected decline in economic activity signal for the home improvement industry? Perhaps it’s not all doom and gloom. For instance, people that might otherwise have been in the market for a new home are more likely to consider renovations as a workable alternative. Moreover, they’ll be adding value to their property should they decide to sell at a later date. Here, we’ll take a more in-depth look at why a recession can be a great time for home improvement projects.
What is an Economic Recession and How Does it Apply to Home Ownership?
The US National Bureau of Economic Research defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales.” In other words, when things start becoming expensive and unsustainable, cutbacks happen until they become affordable again.
With regard to housing, the market has cooled significantly. In the initial stages of the pandemic, remote work made it possible for many employees to ditch high-rise apartments and condos to move to the suburbs or even further out of town. The increase in demand combined with rising building material costs due to higher transport rates led to a significant escalation in house prices across the US.
How Do Recessions Affect Homeowners?
Unfortunately, what goes up must come down. Those who entered the housing market in 2020 or 2021 are now facing a grim reality. As the Federal Reserve continues increasing interest rates to temper inflation, would-be homebuyers are pulling back on their purchase plans. At the same time, developers and builders are scaling down their own schemes. As such, many present-day homeowners who won bidding wars for new houses are now stuck with properties whose value is decreasing.
The recession could affect homeowners in various ways. For example, the odds of losing a job are higher when companies start tightening their belts. And for those who receive the dreaded pink slip, simply selling up isn’t necessarily the best option. Chances are, they’d have to accept an offer that’s lower than the price they originally paid. Moreover, the decision to apply for refinancing just became more challenging, as lenders will favor the security of those with permanent employment. And even if you do manage to get one approved, good luck dealing with ever-increasing interest rates.
5 Reasons Why You Should Renovate During a Recession
For households seeking to upscale their living arrangements, there is another route. Interest in home improvement projects has also skyrocketed. From a $328 billion industry in 2019, the home improvement sector had surged to $472 billion by 2022. It helped that many employees stayed home during the pandemic shutdowns. Flush with cash from government stimulus checks and with lots more free time, they did what any respectable homeowner would do—embark on home improvement projects themselves.
During a recession, where buying a new home is a risky decision, home improvement is a much safer option. So, instead of selling your home at a loss, why not stick around… at least until market conditions are favorable again? Making the decision to renovate your home has many advantages, as we explain here.
1. Rather Spend Money on Home Improvement Projects Than Moving Costs
Do home improvement projects during a recession mean spending money you don’t have? Bear in mind that staying put or moving out both cost money. The question is, rather, how much you’ll end up spending further down the line. While home renovations might require owners to spend upfront, any upgrades you make now will increase the property’s value over time. Meanwhile, by selling your home during a recession you’re liable to get even less than your original purchase price. Add to that the cost of relocation—such as truck rental, movers, new furniture or appliances—and you’ve suffered an even greater loss. In fact, it can cost anything up to $8,000 to move to a new state.
2. Home Improvement Projects are Cheaper and More Practical Than Buying a New Home
Granted, property prices may be lower than last year—according to the National Association of Realtors, there was a drop of 3.1% in the median existing-home price between May 2022 and May 2023. That said, homes are still around $111,500 more expensive than the median price of May 2020.
Even if you manage to bag a good deal, buying a home requires far more money than undertaking home improvement projects. Also, take into account all the other upfront expenses that go with purchasing a home. These include the down payment, reserves and closing expenses—such as transfer tax, appraisal and underwriting fees, title search and insurance costs.
3. High-Quality Contractors Are Available Right Now
Say what you want about the negative effects of a recession—it’s only fair to note the silver linings. A slower housing market makes it more likely you’ll find building contractors to help out at discounted rates. Whether you just need designs or require an entire crew, lower housing demand equates to a better chance of getting good help at competitive rates. And with more workers available, your home improvement projects should be finished on time or even earlier. However, do be sure to vet the proposals that come your way, asking for a detailed rundown of both design and cost.
In addition, the prices of building materials are starting to go down due to lower demand. A falling housing market means a pause or slowdown in construction activity, and therefore less competition for raw materials. Suppliers that stockpiled over the last year in anticipation of an economic upturn are often more than willing to reduce their prices during a recession. Always ask for home improvement sales catalogs when available, and practice comparison shopping whenever possible.
For building contractors, interior designers and home improvement suppliers, this is where presentation software can make all the difference in pitching your products and remodeling ideas to homeowners. It’s a win-win scenario, helping showcase what contractors and suppliers have to offer while giving clients a clear picture of the design project’s details and scope.
4. Home Improvement Can Actually Increase Your Home’s Value
Undertaking home improvement projects isn’t simply about weathering the recession. You’re making your house more comfortable and enjoyable to live in. The bonus is that doing so adds value to your property and can ultimately drive up its price—even in a recession.
Sometimes, it’s not only about aesthetics. Installing upgrades, such as solar panels, energy-saving appliances or even fiber-optic cabling, can help you cut costs while also increasing efficiencies. Replacing your old air conditioning system with a modern, more energy-efficient model will be a plus for buyers looking to reduce utility costs. And once the housing market perks up, you’ll find buyers will be more interested in those homes that made significant upgrades that lower operational costs while boosting efficiencies.
5. Home Improvement Gives You the Home That You Really Want
Home improvement projects aren’t just about improving curb appeal with an eye to a future sale. They’re also about accommodating the changes that you really want. After all, this is your house until it’s not. So, what better time to get that man-cave, modern kitchen, outdoor patio, or Zen garden you’ve always dreamed about? You could also focus on finishing your basement or attic, thus adding more living space and enhancing the overall functionality of your home.
Moreover, remember that by making your home a more appealing space, you’ll be more likely to entertain and relax at home, rather than spending money on restaurants or other activities. It also gives you one more reason to swap out that pricey vacation for a “staycation!”
Ready to Renovate? Consider These Things First
Before pushing through with home improvement projects, remember that while they’re cheaper than buying or moving into a new home, renovations can still cost a lot of money. Homeowners faced with the prospect of downsizing or reduced economic activity should carefully consider which projects to undertake.
Not all renovation projects are equal in terms of time and money. A grand overhaul of your kitchen into something Gordon Ramsay might approve of can and should wait for the time being. Instead, you might do better to focus your limited resources on practical renovations. This includes making smaller improvements to places the whole family frequents, such as bathrooms, living areas or dining rooms. Painting jobs are a good start, especially for areas that could use a refreshed or updated look.
Be Practical
There are several home improvement projects that aren’t about improving appearances. Rather, these changes enrich the lives of residents and keep them safer. Fixing damaged areas of the roof in lieu of a wholesale replacement is one example of a practical renovation. Replacing old or broken lighting fixtures is also a good option. If the budget allows, replacing old and inefficient hot water, heating or plumbing systems with modern ones will save you money over time as well.
Energy efficiency is another great theme. Installing solar cell panels will help reduce utility bills. At the same time, they can boost your home’s value when and if you do decide to re-enter the housing market. Furthermore, rewiring the home to accommodate fiber optics is perfect for transforming an everyday home into a smart one.
Make a Home Improvement Checklist Before Giving the Go Signal
Whatever renovation project you decide on, map out everything you need so you won’t be blindsided by technical issues, added costs or extended workdays. The maxim “measure twice, cut once” applies to even the most basic home improvement project.
Check Your Wallet
Before doing anything else, homeowners should determine their financial health and check if a renovation project is something that won’t hamstring them in the future. Remember, it’s a recession. If you’re better off squirreling away your extra money until the economy improves, then any home renovation project can wait.
Set Your Parameters
Write down the details of your proposed project. Determine its scope and start and end points. With this rough outline, you can then decide whether you have enough experience or knowledge to undertake the project yourself, or whether a contractor’s a better option. Either way, set a budget based on the labor and materials required.
Don’t Start Without Permits
Check with local government whether you need project permits. In many areas, authorities will require permits to ensure local safety and environmental measures are adhered to. Fees are usually a byproduct of these applications, so this should also be factored into the budget.
Talk to the Experts
It doesn't matter whether you’re doing the home improvement projects DIY-style or hiring a contractor. Getting valuable advice from your neighborhood handyman or local government agency can help avoid costly mistakes and delays. After all, they’re in the position to provide inside knowledge about local policy. Plus, they can hook you up with the best suppliers and contractors in the area.
Maximizing Efficiency for Home Improvement Projects
When deciding to work with contractors, you might want to deal with companies that practice the best communication. Those that can provide an appealing visual representation of their plans and proposals are more likely to get the nod.
Ingage delivers interactive presentation software that helps bring proposals, plans and catalogs to life. Its interactive features mean more leeway for presenters to tell their complete stories. Clicking an image or pressing a button can expand a section and provide more details. Plus, Ingage’s powerful analytics track the viewer’s interest levels. This means it can report on which areas generated the highest engagement levels as well as which sections need more improvement to increase attention.
Whether presenting proposals for home improvement projects or submitting product and service catalogs, Ingage is your interactive answer. Visit our site and tell us a bit about your company. In return, we’ll be happy to arrange for a free demonstration.