Recession 2022- Is it a good time to Build or Renovate
Many people are wondering exactly what is going on in our industry and what to expect as our economy makes some adjustments. I have taken some time this morning to provide some knowledge on the topic, please feel free to email me at theeditkamloops@yahoo.com if you have any questions in regard to your situation and if now is a good time for you depending on your goals.
Economic outlook facts: A return to normal in 2022? Nope!
Like the global economy, the Canadian economy will continue its transition from pandemic recovery-driven growth to more normal growth in 2022. The road to regaining this normality, however, will not be smooth and 2022 will be a year of transition.
What does this mean for your dream of a renovation or building your dream spot? Well all is not lost and there are a few key POSITIVES that you can take advantage of now. Providing you have the cash flow there are some awesome upsides to take advantage of.
Questions my clients have been asking:
- Should we wait to make home improvements until “After” the recession hits its hardest?
- Is renovating still a good ideas if real estate prices fall?
- Will I be overpaying for goods and services?
- PLUS SIDES+
- TIME TO PLAN
- Like the last couple covid dampened years- you will probably be spending more time at home. This means you will have time and concentrated effort to put into well through out and planned renovations- key to ensuring maximum return on investment, and final reno outcome. I cannot tell you how many people underestimate the time it takes to plan an excellent reno and thus end up making concessions in quality, budget planning and ability to secure the best trades. TPC -Thoughtfulness Patience Cash!
- Renovated Homes still sell for more and faster than unrenovated homes and the gap on pricing is widening- making a reno to sell a smart move!
COMPETITIVE PRICING & ACCESS TO HIGH QUALITY CONTRACTORS
With lower demand for real estate, we typically see a higher demand for home renovations during an economic downturn. Instead of moving to bigger homes it is a great time to work on improvements to your existing home and maximize its value. This also means contractors will be looking to offer competitive pricing as the demand decreases. As competition rises, high-quality contractors and designers will most likely have pockets of time for your project, even if it is on the smaller scale of things. In the last couple years we haven’t been able to take smaller jobs as we have been so occupied with large scale builds and renos.
KEY POINT: During recessions, the demand for home renovations goes down because fewer people can afford them.
Therefore, those people who can afford the expense are likely to get better prices from contractors for labor/materials.
REDUCING ENERGY COSTS
The window and door industry has seen advancement over the last few years, a demand in luxury materials and a desire for increased energy efficiency. Replacing old windows, doors and appliances can make your home more energy-efficient and reduce energy bills on a monthly basis. We are still dealing with supply chain issues but they are improving and if you address the planning tip above you will be in good shape!
FINANCING
Talk to your trusted advisor first. Generally speaking, it’s OK to borrow money for a renovation as long as you can adequately service the debt it creates while meeting stress test qualifications. This means understanding how the interest rate and repayment structure of your loan will impact your finances. Home Equity Line’s of Credit are a great option, Homeowners can typically borrow up to 80% of the appraised value of their home minus the amount owing on their existing mortgage. For example, if your home is worth $750,000 and you owe $300,00 on your mortgage, you would be able to borrow up to $300,000 on a HELOC. Interest payments are structured, but otherwise, the homeowner is able to move money in and out of the line as they please. Most major financial institutions offer interest rates based on the lender’s prime rate.
WHERE TO RENOVATE
Finishing that basement, creating an outdoor retreat, a working home office and perfecting your most used living areas like kitchens and baths are all worthwhile investments.
If you are custom building with the plan to stay for at least 7+ years, work with your architect and designer to ensure you execute as many wish list items as possible, this will ensure you don’t get the urge to build again for a while and will maximize your investment.
Enjoy some Interior Design Inspiration here:
