Inflation – a steady rise in the prices of goods and services, and the corresponding decline in our purchasing power – is higher today than it has been in decades. In October 2021, the consumer price index (CPI) rose 6.2% from a year earlier, a peak not seen since 1990, according to the US Department of Labor.
“Put simply, inflation measures the change in the value of the dollar,” says Mischa Fisher, chief economist for the home services website Angi. “So with an inflation rate of 6.2%, $100 last year is only worth about $94 this year.”
The cause? Blame COVID
Inflation occurs due to supply and demand imbalances. At the height of the Covid-19 pandemic, the economy came to a standstill and households have stopped spending on non-essential things like travel, entertainment and restaurants. Traders had no choice but to raise prices to stay afloat.
The effects of Covid-19 have also resulted in dramatic shortages of materials, shipping issues and an exhausted workforce. Now, as we try to get back to normal, we are faced with limited supply, high demand and exploding costs.
The effect of inflation on housing
While the majority of price increases are currently affecting the energy sector (you may have noticed this at the gas pump), around a third of the cost increase is in housing. This not only means higher prices for buying or renting a home, but also rising fees for home-related services – general contractor renovations as well as maintenance service providers like plumbers, electricians, HVAC professionals, and those who do septic pumping and chimney cleaning.
Recent research shows that the skilled trades labor shortages has worsened, due to the lack of recruitment of new talent in these areas as the experienced workforce ages. The same research also found that eight out of 10 tradespeople faced shortages of lumber, flooring, roofing and other accessories in the past year. “The combined demand for workers and materials has led to inflation in nearly every home service category,” Fisher says.
The high price of home renovation
Today, people are eager to take action on home construction, renovation and improvement plans. But while the residential the construction industry rebounded, prices are expected to continue to climb in 2022. In addition, large purchases cause a major sticker shock. According to CPI data, last summer, the price of household appliances overall increased by 4.9% compared to the previous year; laundry equipment, in particular, increased by 17.9%.
Appreciate your property
While none of the above sounds like good news, if you own your home, rest assured: real estate is considered a “durable asset,” the type that retains value during downturns. inflation. “Economists have dubbed inflation ‘the cruellest tax’ because it hurts the purchasing power of people who rely heavily on cash, while leaving assets like bonds and property relatively untouched.” notes Fisher.
Face the storm
“Inflation has already exceeded what many economists predicted, so consumers can expect it to be above its recent historical norm for at least another year,” Fisher said. That doesn’t have to put a stop to housing-related goals, but it should mean embracing an inflation-fighting mindset. Consider the following tips, whether you’re building a new home, starting a renovation, making repairs, or replacing major appliances:
- Plan ahead. “Shortages of labor and materials have driven up prices and also caused lengthy delays, so be prepared for the job to take longer,” says Fisher. “Planning ahead will help ensure a project is completed on time.”
- Get multiple offers. Even if you like a particular professional you’ve worked with in the past, it’s more important than ever to get at least three offers from different contractors. “Obtaining multiple estimates not only gives you an idea of how contractors view your project, but also an opportunity to understand how each contractor handles surprises such as delays, cost changes or shortages,” points out Fisher.
- To ask questions. Don’t be afraid to ask potential contractors for examples of recent and similar jobs and references that can speak to their work ethic, punctuality, and handling obstacles in the road. Also find out what is and isn’t included in their prices to avoid unexpected costs, and always get a written contract so you know what to expect.
- Barter a little. Does your electrician’s son need private lessons? Does your plumber’s website need a revamp? Does your roofer need a dog walker? Maybe your skills can come into play to take the fees of these pros down a notch.
- Do-it-yourself wisely. Tackling tasks yourself can save you money, but it can also create problems if you’re not careful. “Check warranty implications and research the project thoroughly before you DIY,” warns Fisher, who cites Angi’s research that found nearly 80% of DIYers made a minor or major mistake during their projects. So while a DIY demo to remove existing kitchen cabinets before a custom kitchen installation could save money in your wallet, if you accidentally damage the underlying drywall and then have to pay for the repair, you might be better off calling a professional early on. .
- Negotiate with suppliers. When shopping for a major appliance, see how the retailer might be able to offset the costs. Ask about freebies on delivery, installation, removal of old appliances and extended warranties. “Also find out if your contractor can get a better deal on materials and fixtures,” Fisher suggests. “These professionals have often built strong relationships with suppliers. »
- Consider an upgrade. Although it may seem counter-intuitive, a fancier fridge or professional-grade range might be your best bet. “Prices of lower-quality imported products have risen more than those of higher-quality, domestically-made options,” notes Fisher. “So you can get more bang for your buck on a device that you originally thought was out of your budget.”