Increasing Remodeling Costs | Episode 15 | Carmel Builders Sidelight Series

April 21, 2021

Join Carmel Builders President & Owner Louis Weiher this week in a discussion of why remodeling costs are increasing while demand for remodeling increases right alongside it.

Transcript:

Hello, everybody. It is, to my knowledge, our fifteenth episode of our Sidelights series, and I’d like to talk about something that I’m getting asked about a lot. If you’re considering a remodeling project, you’re either aware or you’re going to be made aware of the fact that costs have gone up a lot. We’re seeing a pretty historic rise in pricing across the board in our industry. I would say that from a year ago, we’ve seen prices go up anywhere from 20 to 30 percent, pretty much across the board. And we’re feeling this right now. And in early April of twenty twenty one, obviously, a little over a year ago covid hit that. I mean, that certainly is the biggest reason for why this has happened, but there’s more to it as well. And people are wondering, you know, are prices are going to keep rising. Are prices going to eventually flatten out? Will they go back down? So I’d like to answer a few questions about that.

First one, materials is the biggest one. Lumber has gone up a huge amount, over two hundred percent in the last year. Most people are aware of that, but people aren’t aware. We’re seeing prices across the board on a lot of different products. For instance, we’re seeing a roll of romance wiring. The cabling that handles the outlets and the switches and the lighting in your house has doubled or tripled for wholesalers across the last several months. Cabinet harbor, the doors and door slides.

Those have gone up. Roofing materials have gone up substantially. Now, why is that happening? Well, a little bit of it is is just due to supply chain link we’ve got listed here. Hard to get stuff, but a lot of it is just basic economics. Supply is low. Factories and suppliers had to shut down due to covid. But demand is is really, really high. So high demand, low supply prices go up. The other thing that’s happening, the labor has gone up and people aren’t realizing that labor has gone up because demand is so high. So what we’re seeing is two things. Number one, in our industry, we’ve had an issue for a long, long time trying to get good, high quality people. And unfortunately, that problem that we’ve all seen coming is really come to a head.

So there’s just a limited number of skilled workers out there. So what happens is if you’ve got a good skilled worker, you’re going to pay him or her more to keep them around. So we’re seeing wages are going up and obviously those costs get passed on to you as a consumer. Another thing about labor that’s happening is maybe a company that used to do all of its pricing by the hour would say perhaps that’s a six hour project and they would they would build you for six hours of work. Those people are realizing now that they can they can maybe price their stuff by the day. So maybe something was a six hour project is now a one day project.

So putting a little less stress on employees, it’s something as a business owner, I’m very, very sensitive to. And I know my trade partners are as well trying to not put too much stress and pressure on the employees. Everybody’s really busy. There’s a lot of demand out there, but we have to be careful not to burn our people out. So that means higher pay, maybe a little bit less stress on getting stuff done quickly as opposed to getting it done. Well, that’s going to drive labor prices up. So we talk about supply chain. This is still a big issue.

Getting stuff from point A to point B is harder than it was a year ago. If you didn’t see the news a couple of weeks ago, we had a ship stuck in the Suez Canal, believe it or not, that is actually having some impact on some of the stuff that we’re finding. I would tell you that someone I know works for a large supply chain company and they just renegotiated their port rates for a for how much it cost to bring something in and out of port. And so that went up by about 20 percent this year. So all those things get back to these cost units are bringing the pricing up. So costs are really high right now. So the question is, when will it end? Are we going to be done with this in year? Does it make sense to wait to do your project? Short answer is, we don’t know.

I don’t know. If I told you how long it was going to be, I’d be lying to you. But I do think that what we’re going to find is that prices will start to come down when interest rates start to go up. Now, I don’t know if it’s a chicken or an egg situation. I’m not sure if one will happen first or the other will happen first. But really, as interest rates go up and home values go down, prices will come down. So should you wait? That’s a really good question.

It really depends on what you’d like to do. I think that if you wait, you might find that prices are going to come down. However, the amount of equity you have in your home to borrow against will be less. And the interest rate, the cost of that money, if you’re borrowing it will go up. So if you’re looking to do something in cash, maybe waiting isn’t a bad idea. But my guess is that we’re going to see things flatten out and not a real big decrease for for at least another year or so, maybe longer. It’s an interesting time. We don’t really know for sure. But those are just really questions I asked. I get asked by a lot of people. I thought you might be interested in learning about it as well. I hope that helped you out.