The housing and construction industries are some of the most volatile fields in the American economy. Housing trends and land prices can significantly impact the success of any business trying to build or renovate properties. This surge in renovation projects has brought both opportunity and challenges to construction.
To meet growing demand and ensure efficient project execution, many solutions have emerged. One such solution construction workers might seek out is a strong construction takeoff software that combines forces with another revolutionary technology — artificial intelligence,
By staying on top of these trends and technological innovations, you can better meet the needs of your clients and build a more resilient business — proactively offering solutions instead of reacting to their concerns.
At present, one of the most notable trends in construction is the preference for renovation over new builds. In 2022, billings for reconstruction exceeded those for new construction projects for the first time. Explore the reasons behind this trend and how your business can respond to it effectively.
Reasons Behind the Renovation Trend
This move toward increased renovation is a new departure from past trends. Even as recently as 2020, the majority of buyers (60%) preferred newly built homes over existing ones, according to the National Association of Home Builders. Within just a few years, buyers are moving away from building new properties or buying them and are opting for renovations instead. Here are a few reasons behind this sudden shift in the past few years.
Economic Factors
Several economic factors are driving people to renovate rather than build or buy new homes. The first is the existing housing shortage. Between 2012 and 2022, the housing gap — families in need of homes versus houses built — increased to 2.3 million homes. More people want homes than are available, which drives prices up and pushes some families out of the market. Existing homeowners are more likely to renovate their homes rather than try to find new construction that also meets their specific needs.
Other economic factors include inflation. In almost any economy, it is cheaper to renovate a house than to build a new one. Home renovation costs $100 per square foot on average while building a new house costs $150 per square foot on average. People who feel financial pressure at the grocery store or gas pump (as 93% of Americans currently do) might decide to save money by renovating instead of building or buying new.
The Pandemic
Of course, the trend toward renovation isn’t just because of money crunches. Many homeowners are happy with their properties and want to renovate them to better accommodate their lifestyle needs.
DIY renovations surged at the start of the COVID-19 pandemic because people suddenly spent all their time at home. Americans turned guest bedrooms into home offices to accommodate remote work and remodeled kitchens and patios to make them more inviting.
As restrictions were lifted and it was safe to leave the home, people continued to invest in home renovations. Now, people who want major improvements done — or simply don’t want to DIY anymore — can safely hire contractors to update their homes.
Aging Infrastructure and Buildings
Additionally, not all renovations are proactive investments by eager homeowners. Many people need to invest in renovations to make repairs to existing structures. In October 2022, Hurricane Ian destroyed more than 5,000 homes but severely damaged more than 30,000. Home insurance won’t cover full rebuilds for many of those properties.
Even healthy, existing structures need renovations in many cities. One New York Times article highlights how 90% of buildings in New York City will still be standing in 2050. However, these buildings also account for 70% of the city’s carbon emissions. Poor insulation, historic windows, aging plumbing, and other antiquated building practices make these buildings inefficient for modern residents. Teams are working to renovate these older buildings to meet green initiative goals.
Many people would rather live in an older building in a good area than buy new construction. As cities fill up, contractors have to fight to find undeveloped land — which often pushes them into the suburbs. Someone who wants to live in Brooklyn will likely be happier with an existing building rather than a new build in Newark.
Shifting Preferences
Americans have fallen in love with home renovations. In 2023, Home and Garden Television (HGTV) was the 11th most popular channel on TV. Scrolling Zillow has become a hobby for countless people who look at how their neighbors and homeowners across the country design their spaces. Even people who love their homes are constantly looking to embrace the latest trends.
This rise in popularity for renovating will affect both residential and commercial contractors. Home contractors might notice an uptick in demand for open floor plans and will spend more time planning how to take down walls. This translates to a commercial setting with an increase in demand for open and collaborative workspaces for teams to meet in throughout the day.
A few additional changing trends that contractors need to keep an eye out for include the rise in home offices because of the pandemic, increased demand for green buildings, and accommodations to age in place. The number of Americans older than 65 increased from 35 million to 55 million between 2000 and 2020. An overwhelming 93% of these people want to stay in their own homes as they get older — as opposed to living with relatives or in an assisted living facility.
What It Means for Homeowners
The preference toward renovations is a good thing for existing homeowners who can benefit from this increased focus on the home. Here are a few reasons why people who already own should embrace this trend.
Increased Home Value and Market Appeal
A home is more than just where you live, it is also a financial investment. Renovations can increase the value of the property and make it more desirable to buyers.
Keep in mind that not all renovations increase home values equally. Replacing or updating roofing has a 100% recovery rate on average, along with replacing a garage door — according to the National Association of Realtors. For the interior, some of the projects with the highest return on investment include replacing the flooring, updating insulation, and converting the basement into a living area.
Enhanced Lifestyle
While renovations can increase your property values, they can also improve your living experience. The home office is a perfect example of this. At the start of the pandemic, people worked at their kitchen tables or hunched over desks in crowded living areas while kids attended school online. Eventually, people renovated spaces to create dedicated home offices with ergonomic chairs, doors for privacy, and other essential features.
The NAR report linked above also assigned a “Joy Score” for interior projects. These are renovations that made people happiest. Some of the top renovations include painting various rooms, renovating closets for more storage space, and doing kitchen upgrades.
Cost Savings
In the long run, home renovations can increase property values while helping homeowners save. For example, a homeowner can highlight their insulation upgrades that drive down their monthly energy bills — something any buyer would find desirable. These sustainability upgrades have immediate cost savings and long-term ROI.
Renovating is also more affordable than buying or building because owners don’t have to pay moving costs or Realtor fees. Instead of moving to a bigger house, a homeowner might build an addition that gives them more space and increases their property values. This could have a big impact on homeowners who already live in a desirable area.
What It Means for Contractors
Contractors and construction companies can also capitalize on renovation trends to grow their revenue. Here’s what you need to know for your business.
Expanded Service Offerings
The first step is to expand your service offerings to include renovation and to market this new service to potential clients.
If you are used to exclusively building new properties, you may need to adjust your processes to provide quotes and estimates to clients. You need to make sure your bids stand out and are easy to understand so customers choose your business over your competitors. Make sure you have the right construction software tools to pivot your business toward renovations.
Embracing Technology
Homeowners are increasingly comfortable with technology; nearly 73% of Americans owned smartphones in 2021. You can embrace technology within your business to win over customers while streamlining your operations.
For example, you can use drywall estimating software to provide better cost estimates to your clients — and to better balance your books. Digital floor plans can help you turn the visions of clients into blueprints that then become realities.
Many people have emotional attachments to their homes. Through the use of these tools, you can assure them that you are going to improve the space with minimal risk of damage.
Exploring Sustainable Solutions
Construction generates more than 100 million tons of waste each year, accounting for nearly 40% of solid waste generated annually. Embracing renovations is a great way to reduce waste compared to a full demolition and rebuild.
You have an opportunity to be a leader in sustainability within the construction industry because of your expertise. Not only can you focus on renovating instead of building, but you can also waste fewer materials with better estimates — having the confidence to order the correct amount of materials such as concrete. You don’t have to eliminate waste entirely, but you can take steps to significantly reduce the number of trips your team makes to the landfill.
The move toward renovating isn’t a bad thing. It highlights how people are happy where they are and want to improve their current space. This is an opportunity for contractors of all sizes, even if you have only ever built new constructions before this year.
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