Economics

Inflation is a major factor, with building materials still seeing elevated costs compared to pre-pandemic levels. Tariffs, supply chain issues, and higher energy prices are contributing to a rise in project costs, forcing homeowners and developers to be more strategic with their budgets.

The home remodeling market is projected for a modest recovery in 2025 after a period of decline. Economic indicators like a stable labor market and rising home equity are supporting a slight increase in spending on home improvements.

Relatively high interest rates remain a hurdle for homeowners seeking to finance large-scale renovations. The cost of borrowing is making some consumers pause or scale back on major projects, although some experts anticipate a slight ease in rates later in the year.

New and existing tariffs on imported materials like steel, aluminum, and copper are increasing costs for many construction projects. This leads to higher material prices, which can disrupt supply chains and cause project delays, as firms may need to find alternative, domestic sources.

Yes, homeowners can take advantage of federal tax credits for energy-efficient upgrades through the end of 2025. These include credits for insulation, doors, and heat pumps, with potential savings of up to $3,200. There are also state-level programs, such as those from the Inflation Reduction Act (IRA), that offer rebates for home efficiency retrofits and electrification measures.

The housing market in 2025 is expected to remain frozen with low inventory and subdued demand, due to high mortgage rates. This "lock-in" effect is leading more homeowners to choose renovation over relocation, making smaller-scale upgrades and maintenance a top priority.

According to the 2025 Cost vs. Value Report, exterior projects continue to offer the best ROI. These include garage door replacement and manufactured stone veneer. Interior projects like hardwood floor refinishing also provide a very high return.

A tight construction labor market continues to be a top concern. While some job openings have decreased, the overall supply of skilled workers remains a challenge, which can lead to higher labor costs and extended project timelines for consumers.

Consumer confidence is projected to remain moderately robust, supported by a stable labor market. However, consumer sentiment can change quickly, and homeowners are showing caution by prioritizing smaller, essential projects over large, discretionary remodels.

Key regulatory changes in 2025 include new tariffs on imported materials and ongoing policy shifts that affect supply chains and material costs. There is also a continued push for electrification and lower carbon emissions, which may add new costs as developers adapt to sustainability requirements.

With higher interest rates, home renovation loans and other forms of financing are more expensive than in recent years. This has led some homeowners to delay projects that require significant borrowing, though financing options are still available.

The price of quartz and granite is influenced by global economic factors, including tariffs, energy costs for production and transportation, and currency exchange rates. While demand may stabilize, these materials are subject to price volatility.

Yes, with a focus on affordability and a cautious approach to large-scale projects, there is a renewed interest in DIY projects. Homeowners are tackling smaller upgrades, like paint, cosmetic updates, and some flooring installations, to save on labor costs.

According to recent surveys, bathrooms and kitchens remain the most common spaces for renovation. Other popular areas include living rooms, with a focus on cosmetic upgrades like new flooring and paint.

While improved from previous years, supply chain disruptions are still present due to global economic instability and tariffs. This can lead to delays in material deliveries and necessitates more strategic procurement from contractors and homeowners.

New home construction is experiencing a slowdown due to higher interest rates and reduced demand. Builders are focusing on a few key sectors, such as data centers and manufacturing, while residential starts have been more subdued.

In addition to federal tax credits for energy efficiency, some states and local governments may offer tax benefits or historic preservation grants for renovating older homes. It is recommended to check with local authorities for specific programs.

Rising energy costs have a direct impact on the production and transportation of materials. This affects energy-intensive materials like concrete, aluminum, and steel, leading to higher prices that are passed down to the consumer.

The trend toward sustainability is strong, driven by consumer demand and government incentives. While some green materials can be more expensive, rebates and tax credits help offset the cost, making them a more appealing long-term investment.

The key advice is to plan and budget with cost volatility in mind. Secure your materials and pricing early, consider financing options, and prioritize projects that offer a high return on investment. Working with a contractor who is transparent about potential price fluctuations is also crucial.