At the time of writing we’re heading into a global recession that may well be the worst in a generation, but what does this mean for US homeowners and tenants? Is a recession a good or bad time to consider doing any home improvements?
Home improvements can be cheaper during a recession as renovation contractors often charge less. However, this can be offset by higher prices for building materials, plus stagnating or lower household income and inflation of prices in other areas such as food and energy bills.
Let’s dive down into the subject of home renovations during a recession in more detail, and discover what exactly this means for you, your home and your finances…
Is a Recession a Good Time to Do Home Improvements?
Generally yes. In a recession, the prices for most things decline, including houses, renovation contractors, and sometimes building materials for home improvement, (although this last one can go either way).
For all the home buyers who took advantage of the low low mortgage rates of the past few years, it may be the time to start considering home improvements now.
During the beginning of the pandemic, folks who had been thinking about home improvements sprung into action. Many of us spent beaucoup bucks on our homes.
Home office renovations went crazy. Thanks to everyone spending the reno bucks, new home construction, and the implacable supply chain issues, home renovation costs exploded. Contractors could name their price – if you could find one. The cost of building supplies went through the roof – if you could find them.
But in a recession, the opposite happens. Historically, inflation is uncomfortably high and consumer confidence is uncomfortably low – so there’s no new home buying. New home construction declines, too. The high prices of building supplies eases – although supply chain issues are still a wild card.
With lowering building materials cost, contractor availability and relative low cost, it’s a good time to do those modest home improvement projects.
Home Improvement experts agree that the best value in home improvement is in paint. If you are thinking about more substantial renovations, consider updating your kitchen and bathroom first.
Here’s Morgan Stanley and how bad they think a recession could be right now.
And here’s a video explaining what a recession is…
Should I Start My Yard Landscaping Project in a Recession?
We say yes. Not big bucks, but small to medium bucks.
If you are living in your forever home, modest landscaping projects are a great way to improve your quality of life. Recessions can be tough. Consumers and businesses alike lose confidence. Layoffs happen.
Study after study proves that getting outside, into nature, improves our spirits. So we say – spend small to medium bucks on a happy space outside.
Consider planting colorful garden beds or creating a container garden. DIY a pergola and hang drapey curtains to enfold you and your loved ones.
If you are just going to wait out the recession and then put your home on the market, spend your landscaping bucks on curb appeal. Cut back those overgrown shrubs in your front yard and plant some attractive perennials.
Make a space in the backyard for the family to gather.
How Can I Save on My Yard Care Bills During a Recession?
In a recession, most experts say to reduce as many monthly expenses as you can. First, go through your expenses line by line. Once you know where your money is going, think about your priorities. Then consider cutting the expenses at the bottom of the priority list.
Chances are that lawn care is close to – or at – the bottom of the list.
If you have a large lawn, you might be spending a lot of bucks on water and mowing. Investigate lawn alternatives. Consider cutting back on your lawn.
If you replace half your lawn with low-maintenance garden beds, you will save half on fertilizer, aeration, water, lawn mowing service, cost to maintain those sprinklers, mower gasoline, and edger gasoline.
Buy a smart water meter so you don’t spend water money when your lawn doesn’t need it or at a time that it mostly evaporates. Cut back on costly fertilizer by making your own.
Consider replacing part of all of your lawn with xeric and native perennial plants. Mulch your garden beds so that expensive water doesn’t just evaporate.
Get into planting seeds instead of splurging at those (gorgeous) garden centers. Consider replacing your old combustion engines – mower, blower and edger – with electric models. At the price of oil today, the investment in batteries will be worth it.
Here’s Take A Yard article on whether yard care bills are worth it.
Will Landscaping & Lawn Care Services Become Cheaper in a Recession?
Yes. Historically, most services will become cheaper. As consumer confidence weakens and stock market savings devalue, most folks are less willing to spend precious bucks on services, lawn care and landscaping included. Demand drops and landscaping professionals lower their rates.
Do Houses Become Cheaper During a Recession?
Historically, houses become cheaper in a recession. Many say that we are due for a slower housing market – a correction – anyway because it’s been so red hot for the past few years. Add to that, mortgage rates have risen sharply lately.
During a recession, folks are worried about their jobs and the drop in their stock market nest egg value. They aren’t willing to make the large investment that a house requires. The shortage in houses for sale we’ve been experiencing the past couple of years will ease.
As the demand for houses decreases and the supply increases, prices will drop.
What Happens to Construction During a Recession?
In an average recession, construction is one of the hardest hit industries during a recession. In the residential sector, as folks see their nest eggs shrinking, their appetite for making a large investment goes down.
In the commercial building sector, companies are also hunkering down, not investing in new digs. As industries contract, so does their need for new buildings. Civil construction also decreases.
In a recession, construction stagnates in all sectors. In the recession of 2008, the construction industry suffered nearly 2.5 million layoffs.
Will Building Materials Become Cheaper in a Recession?
The cost of building materials trend lower during a recession. Demand drops, so prices do too.
Construction activity and building materials costs tend to track each other. During a recession, construction drops in all sectors, so the cost of building materials does too.
How Long Do Recessions Last? (And What Does This Mean For Homeowners?)
The National Bureau of Economic Research (NBER) keeps track of when recessions begin and end. The NBER defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months.” Their data shows that, between the years of 1854 and 2020, the average recession lasted 17 months.
For the majority of homeowners, that year and a half is a good time to DIY small home and yard projects, stash the money from reduced bills, and refinance high-interest mortgages.
But, for a small percentage of (bold) homeowners, a recession can be a buyer’s market. If you have the cash, and if mortgage rates decline, you might find a second home or investment property bargain.
Here’s the Forbes Advisor on how long recessions last.
What Happens to Mortgages During a Recession?
In every recession since 1854, NBER says mortgage rates have fallen. But, the amount they have fallen isn’t always a large one – the range is between 0.22% at the least and 3% at the most.
Summary: How Can I Save on My Household Bills During a Recession?
Here are some ways to cut back on household expenses:
- Housing. The cost of housing – either renting or owning – is probably your largest expense. If you are renting, check out whether you can move to a cheaper space. Consider getting a roommate. If you own a house, check whether it makes sense to refinance your mortgage. If you had to have mortgage insurance, check whether you can drop it now. Consider converting your basement into a rental unit.
- Credit Cards. First, stop charging – just use cash or debit cards. Put the cards in a drawer. If you have several credit cards, consider paying more than the minimum on the one with the highest interest rate. Or, check into credit card consolidation. You may get lower monthly rates by combining all your card debt into one.
- Subscription services. Automatic bill paying is so easy that it’s easy to lose track. Go through your monthly charges and write them down. Include streaming services, online books, music, internet, cell phone charges, games, cloud storage, online magazines, etc. Then prioritize the list. Cut the bottom third, at least. More is better.
- Insurance. If you have several types of insurance – car, rental, home – you may be able to lower your total bill by finding just one insurance carrier for them all. Negotiate!
- Entertainment. Yes, you too can eat at home, pack your lunch, drink less bee or go on staycation.
- Food. Trips to the grocery store can be painful. But, if a recession comes, prices may go down. Shop with a list and find off-brands that you like.
- Energy. Consciously try to lower your energy bills. Turn off lights, keep your house warmer in the summer and cooler in the winter. Check out ways to cash in on government energy programs, like installing a swamp cooler.
Here’s a quick video by the Wall Street Journal on why a recession today would be like no other.