Spring is kickoff season for many kitchen remodels, bathroom updates and deck repairs, but recent economic turmoil may have homeowners questioning their home improvement plans.<\/p>\n
Spending on home renovations is expected to slow this year because of factors such as declining home sales and values, rising interest rates, continuing inflation and rumblings of a coming recession, says Abbe Will, senior research associate with Harvard University\u2019s Joint Center for Housing Studies.<\/p>\n
As economic growth slows, planning and prioritizing will be key to remodeling confidently. Here are five tips to help you remodel in an uncertain economy.<\/p>\n
Even when the economy is doing well, it\u2019s ideal to have an\u00a0emergency fund\u00a0before starting a remodel, says Eric Maldonado, a certified financial planner based in San Luis Obispo, California.<\/p>\n
\u201cWhat you\u2019re trying to avoid is starting with nothing saved, taking out debt to afford these things and not really providing yourself with a smart foundation to start from,\u201d he says.<\/p>\n
A six-month fund is a good goal, he says, especially if you\u2019re concerned about losing your job.<\/p>\n
Related:<\/strong> We bought a falling-down 100-year-old home. We tried to renovate, but things took a turn for the worse.<\/p>\n After your emergency fund is set, put remodeling on a short list of your financial priorities for the year and distribute your budget accordingly, Maldonado says.<\/p>\n For example, if your main goals are to\u00a0pay off debt, contribute to your kids\u2019 college funds and begin home improvement projects, determine how much each goal costs and how much you can afford to spend on them every month, he says.<\/p>\n \u201cIt\u2019s kind of like putting the big rocks into the jar first,\u201d he says.<\/p>\n This may mean slowing progress toward other financial goals, like early retirement or purchasing a new car.<\/p>\n If high gas and grocery bills have left you with less to spend on home improvements this year, prioritize projects that have the potential to affect your finances the most, says Katherine Fox, a certified financial planner based in Portland, Oregon.<\/p>\n Fox recommends starting with fixes that would be costlier to delay, such as a leaking pipe. Then, consider updates that will save you money in the future, like new windows or insulation that may lower your utility bill.<\/p>\n Look for opportunities to mix \u201cnice-to-haves\u201d with \u201cmust-haves,\u201d she says.<\/p>\n \u201cMaybe you have something behind a wall that needs to be fixed, so you have to open up a wall, and then you have to repaint,\u201d she says. \u201cMaybe you take this opportunity to fix a need and get a want at the same time.\u201d<\/p>\n Plus<\/strong>: How your homeowners insurance can bail you out in some surprising situations<\/p>\n The Federal Reserve\u2019s persistent interest rate hikes over the past year have led to raised rates on most financing options, so you\u2019ll likely pay more interest on a new\u00a0home improvement loan\u00a0than you would have before.<\/p>\n Maldonado says home equity loans and lines of credit are typically the lowest-rate options, but he recommends comparing financing options to find the best rate and terms.<\/p>\n Most\u00a0home equity and personal loans\u00a0come in a lump sum and have fixed interest rates, so your monthly payment remains the same for the full term.<\/p>\n A home equity line of credit, or HELOC, provides more flexibility for large projects because you can draw on it as needed for up to about 10 years. However, HELOCs typically have variable rates, which means monthly payments can fluctuate.<\/p>\n Also read:<\/strong> Right and wrong ways to use a HELOC<\/p>\n While prioritizing projects, decide whether you can delay any for a year or more. As fickle as the economy has been, there are signs that those who wait could pay less.<\/p>\n The pandemic-induced remodeling frenzy triggered a sharp increase in labor and materials costs that homeowners felt last year, according to a March 2023 report from Harvard\u2019s Joint Center for Housing Studies. Cement, brick and plywood prices rose 20% to 25% between March 2020 and December 2022, the report found. Insulation material costs rose 34%. This year, materials may get cheaper, the report said.<\/p>\n Likewise, home improvement spending is expected to decline in early 2024 for the first time in more than a decade, according to the center\u2019s\u00a0Leading Indicator of Remodeling Activity, which measures and projects remodeling spending.<\/p>\n If you can tolerate the guest bathroom as it is or stomach that non-load-bearing wall for another year or two, you could get the work done at a discount, Fox says.<\/p>\n Just be sure you\u2019re in a secure financial position and feel good about your employment prospects if you bet on a recession, she says.<\/p>\nNarrow your financial goals<\/strong><\/h2>\n
Prioritize repairs and small updates<\/strong><\/h2>\n
Compare financing options<\/strong><\/h2>\n
Consider delaying to save money<\/strong><\/h2>\n