The Expert Podcast

The home construction market has experienced many ups and downs, from remodeling to new builds. But what's coming down the pipeline? Over the last two years, there was a significant spike in remodeling and construction. When the pandemic hit, people wanted to add more space to their homes and upgrade their living spaces. During the same period, low interest rates and rising home prices drove people to build new homes. However, that phase is over. Interest rates have risen, affecting remodels, as most people need to borrow money for these projects.

In the next couple of years, there is likely to be another spike in remodels and additions. Why? Homes typically go through major design and upgrade changes when they are 30 to 40 years old. At this age, major reconstruction becomes necessary—like replacing the roof, upgrading the septic system, or restructuring the floor plan to fit modern living standards. While smaller remodels like painting or light kitchen upgrades happen earlier, 30 to 40 years is when significant changes occur. Homes from the 1980s are now reaching this stage, creating a wave of required remodels.

This era of remodeling brings significant opportunities and challenges for builders. Many of these homes need functional and aesthetic upgrades. Roofs, siding, and other structural elements often last about 30 years, and now they need to be replaced. Homeowners also want modern layouts, larger closets, or open floor plans to suit contemporary tastes. Builders should prepare for an influx of projects, though high-interest rates might temper demand slightly. Borrowing money at 8% or higher can deter some homeowners, but others will proceed out of necessity—for example, to fund a $40,000 roof replacement or a $25,000 kitchen remodel.

The residential remodeling market numbers are substantial. According to recent data, 24 million homes need repairs or upgrades, including roofs, floors, heating, cooling, kitchens, and bathrooms. Homes in their prime remodeling years—20 to 40 years old—are undergoing facelifts. This trend is expected to be systemic over the next decade, requiring builders to adapt their processes. Compared to building new homes, remodeling is less intensive and quicker. A remodel might take three to four weeks, while building a home could take three to four months.

Interestingly, the rise in remodeling is also influenced by higher mortgage rates. In the past, when a home needed significant repairs, people would sell it and buy a new one. However, many homeowners are now locked into lower mortgage rates (around 4%) and are choosing to stay put. Upgrading their current homes through remodels makes more financial sense than taking on a new mortgage at 6.5% or higher. Despite higher remodeling costs—due to rising labor and material expenses—many homeowners view upgrades as necessary.

The remodeling market does face challenges. Homeowners are becoming more price-sensitive due to higher costs and economic conditions. Sticker shock is common, as the cost of a kitchen remodel, for instance, has jumped significantly over the years. Builders also face workforce issues. Skilled labor is scarce, with some workers earning $80 to $100 an hour but proving unreliable or unqualified. Additionally, while material backlogs have eased slightly, some larger structural materials still face delays due to production curtailments at lumber mills, particularly in western Canada.

For builders, this period requires adaptability. Many remodeling projects could benefit from a streamlined, cookie-cutter approach to increase efficiency. However, securing skilled labor and managing material supplies remain significant hurdles. Despite these challenges, the remodeling boom presents a unique opportunity for the construction industry to innovate and thrive.