“We discussed the high rates of appreciation that had two effects on the remodeling market. One is it gives people confidence the remodeling projects will hold their value or even increase in value. And second, that increase in equity can then be a source of fund to tap into with a home equity loan – which can be particularly important in financing larger projects,” he said.
Even as a seasoned researcher, Emrath acknowledged being surprised by the remodeling enthusiasm despite ever-rising lumber costs – up 218% in recent months to $1,238 per thousand board feet. What’s more, he noted, the Producer Price Index of the US Bureau of Labor Statistics shows a 21% increase in gypsum prices. And then there are those pesky skilled labor shortages that further exacerbate delays, Emrath added, with 345,000 open construction positions in November 2021.
“I was surprised it’s been as strong as it has been,” he said. “A lot of customers have been willing the higher prices and delays.”
Which is not to say homeowners should rest on their laurels: “There are no quick fixes to the supply chain issue, so I would say manage expectations,” Emrath said, in the way of advice to equity-dipping homeowners. “Compared to what you may have expected two years ago, be prepared for prices to be higher, and maybe have escalation clauses in their contracts so the remodeler doesn’t have to anticipate a big increase in prices and build that into the price without any flexibility. Also, expect that things will just take a little bit longer.”