The Real Remodeling Timeline
If your clients say they have decided to remodel rather than move due to the additional cost due to interest rates, don't just smile and say OK. Learn about what is happening with construction in your area and give them a reality check.
As interest rates continue to cause gridlock, several of the agents in my ENCORE coaching group have indicated that would-be sellers on their potential client list are considering sticking with their low interest rate mortgage and are choosing to explore remodeling instead.
From what I can see, one industry that has it worse than the real estate industry when it comes to gridlock is the residential construction industry.
Builders are currently stymied by:
- Interest rates (on their own projects)
- Labor shortages in both their own companies as well as other companies they may sub out to
- Materials shortages
- Permitting timelines
- Changes in the code
- Environmental requirements (revisions to the energy code, stormwater, tree removal, etcetera)
All of these issues cause builder gridlock. Let's take a deeper dive into the realities of remodeling right now:
The Great Recession of 2008 caused a number of builders and subcontractors to leave the industry. Couple this exodus with decades of institutional focus on four-year degree careers and the result is a population that has been choosing different career paths. Now, when we need them most, we are short builders, plumbers, electricians, building systems engineers, concrete professionals, engineers, planners, estimators, geo-tech consultants, and other professionals who drive the industry.
This is a problem that doesn't have a quick fix. According to the National Bureau of Labor Statistics, unemployment is currently 3.8%. So, we don't even have other industries that are in trouble whose employees can quickly pivot and be retrained for construction. Our other workforce source is young people who might be interested in receiving training in one of these fields. Although enrollment in colleges has dropped off since the pandemic, according to Business Insider, trade program enrollment is up 19.3%. That is great news for the future of the construction industry, but we still have a long way to go before our construction workforce numbers turn around.
The challenge we are seeing in terms of boots on the ground is there are too many job openings. Our trades are operating with a skeleton staff. That makes scheduling a much bigger challenge. It only takes one or two crew members out due to illness to have a big impact on project timeline.
In short, today's lack of professionals is making it more difficult, and expensive, to remodel.
Delays in Planning
The challenge with lack of professionals extends to planning jobs too. Architects, engineers, land use specialists, and others are in high-demand. In some areas, there is a downright bottleneck. The Survey of Architectural Registration Boards recorded a 1% decline of licensed architects from 2021 to 2022. While they also noted a 9% increase in candidates working towards licensure, this is a multi-year process that doesn't solve today's issues. The Bureau of Labor Statistics also noted that the need for professionals in this profession will be stronger than general employment in the coming years.
Beyond employment shortages, there are more layers to project planning today and more milestones needed just in the planning process. Depending on the area, building an addition on a home might require not only blueprints of the structure, but also an energy efficiency review of the rest of the building, an evaluation of the site, evaluation of the structure in terms of fire code, parking analysis, emergency vehicle access, stormwater analysis, and possibly even a critical areas analysis.
Lack of planning professionals coupled with additional requirements are also making it more difficult, and expensive, to remodel.
The same issues that plague the professional and planning side of the industry are also hitting local permitting offices. According to Building Industry Association of Washington, the average permitting timeline noted in February of 2022 was 6.5 months, a delay that added approximately $22,000 to the price of a new home. The worst timeframe noted was Thurston County with 17.79 months.
The challenges with permitting are not limited to personnel, although that is a big driver of the delays. Other permitting process issues are problematic where there is too much redundancy and other bottlenecks in the process.
Local legislature isn't ignorant of the issue. Here in Washington State, there is hope that Senate Bill 5290 will provide structure, accountability, and solutions when it comes to permitting, but this will also take time to implement.
Meanwhile, challenges with permitting will continue to make it more difficult, and expensive, to remodel.
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Time is Money
Addressing remodeling timeline issues are one thing, but timeline issues can mean big money headaches when coupled with inflation. Although inflation is back into target range overall, specific item prices can still increase significantly between initial planning and placing the order.
The other timeline issue that hasn't be addressed is the lengthier period of disruption. If an addition that would take 4 months a few years ago could take 8 months or more now, are your clients up for that amount of disruption to their household?
In conclusion, if your clients say they have decided to remodel rather than move due to the additional cost due to interest rates, don't just smile and say, "OK, whatever you decide." Learn about what is happening with construction in your area and give them a reality check.
By Denise Lones CSP, CMP, M.I.R.M. - The founding partner of The Lones Group, Denise Lones, brings nearly three decades of experience in the real estate industry. With agent/broker coaching, expertise in branding, lead generation, strategic marketing, business analysis, new home project planning, product development, Denise is nationally recognized as the source for all things real estate. With a passion for improvement, Denise has helped thousands of real estate agents, brokers, and managers build their business to unprecedented levels of success, while helping them maintain balance and quality of life.