How foolish is it to embark on an expensive home remodel right now?
July 31, 2020 8:59 AM Subscribe
We've been planning a large home remodel for 2-3 years now. Our design-build firm just informed us they could begin construction in October. Based on the financial state of the world right now, is it foolhardy to go ahead with construction right now? Should we hold off for a few more years?
The remodel is comprehensive (down to the studs in about half the house; we'd be moving out for the duration). The construction estimate is large, using up most of our savings as well as incurring new debt. (We do have the loan lined up.) I've always been worried by the magnitude of the expense, but COVID and the gloom over the national/global economy brings a whole new aspect to this worry.
My wife and I are both employed, but our employment (like so many other folks') is precarious due to the economy. We have a young child. We're going to set aside 4-6 months of living expenses, but is that enough? What are the pros/cons of waiting for a future time that seems safer? What should I be thinking about?
The remodel is comprehensive (down to the studs in about half the house; we'd be moving out for the duration). The construction estimate is large, using up most of our savings as well as incurring new debt. (We do have the loan lined up.) I've always been worried by the magnitude of the expense, but COVID and the gloom over the national/global economy brings a whole new aspect to this worry.
My wife and I are both employed, but our employment (like so many other folks') is precarious due to the economy. We have a young child. We're going to set aside 4-6 months of living expenses, but is that enough? What are the pros/cons of waiting for a future time that seems safer? What should I be thinking about?
My Depression grandparents would advise you not to do this on borrowed money, not unless the house is actually unlivable without (closing off half of it in the heating or cooling season did not count to them as unlivable).
posted by clew at 9:15 AM on July 31, 2020 [2 favorites]
posted by clew at 9:15 AM on July 31, 2020 [2 favorites]
I would not do this right now if I were you. I just finished a gut renovation of a two unit property in July 2019 and if I had known this shit show was coming in 2020, I wouldn't have done the project or even bought the place. Projects of this size are full of unknowns - what if one of you gets laid off, and the contractor ends up 10-20% over budget due to unforeseen change orders you didn't know would be necessary until after demo was completed? Would you be able to handle that?
Unless your house is in a condition where it's not liveable, or there are some legitimate health and safety issues you need to mitigate in order to protect yourselves and your child, like lead plumbing, asbestos, mold, etc. wait a while.
posted by zdravo at 9:17 AM on July 31, 2020
Unless your house is in a condition where it's not liveable, or there are some legitimate health and safety issues you need to mitigate in order to protect yourselves and your child, like lead plumbing, asbestos, mold, etc. wait a while.
posted by zdravo at 9:17 AM on July 31, 2020
Having said that, it’s everybody retrenching at once that helps cause the Depression. Is there a not-just-aesthetic bad thing that you can get fixed on your current cash?
posted by clew at 9:17 AM on July 31, 2020
posted by clew at 9:17 AM on July 31, 2020
I'd hold off, myself.
By way of comparison, I am considering a smaller expenditure to redo my back yard entirely, install a two-level deck using fancy composites, a plumbed outdoor kitchen area, pergola-type roof, a screen wall to block late afternoon sun, fire pit, and so on. So, a reasonably large expense.
I have the necessary funds in cash, with cushion to spare, and I think I'm gonna hold off until next year because right now I'm feeling like a pile of liquid money is probably more important than sitting outside on a nice day doing the WFH thing in style.
Maybe see if you can break the process into stages, and just get some important stuff done now with the rest to follow later?
posted by aramaic at 9:20 AM on July 31, 2020 [2 favorites]
By way of comparison, I am considering a smaller expenditure to redo my back yard entirely, install a two-level deck using fancy composites, a plumbed outdoor kitchen area, pergola-type roof, a screen wall to block late afternoon sun, fire pit, and so on. So, a reasonably large expense.
I have the necessary funds in cash, with cushion to spare, and I think I'm gonna hold off until next year because right now I'm feeling like a pile of liquid money is probably more important than sitting outside on a nice day doing the WFH thing in style.
Maybe see if you can break the process into stages, and just get some important stuff done now with the rest to follow later?
posted by aramaic at 9:20 AM on July 31, 2020 [2 favorites]
If you think you might sell the house ... just sell the house now, with the plans and approvals in hand. The single-family market is on fire - never more demand to get out of the city for the suburbs, never lower mortgage rates.
If you want to stay in your house ... wait. Your savings levels are thin and the job market is uncertain, and because of the market being on fire you may find that the October start and the forecast for the time the job takes could each be optimistic.
posted by MattD at 9:37 AM on July 31, 2020 [4 favorites]
If you want to stay in your house ... wait. Your savings levels are thin and the job market is uncertain, and because of the market being on fire you may find that the October start and the forecast for the time the job takes could each be optimistic.
posted by MattD at 9:37 AM on July 31, 2020 [4 favorites]
with your situation, this would be beyond my comfort level of risk.
posted by fingersandtoes at 9:38 AM on July 31, 2020
posted by fingersandtoes at 9:38 AM on July 31, 2020
I think you have two risks to think about:
1) Financial risk - if either of you lose your job, would you be able to sustain the payments to finish the renovation in the interim? What if you both lose your jobs? If the answer is no, don't go through with it.
2) Construction timeline stretching - What are the timelines from the design-build firm? Have they changed at all since COVID? Are you willing to deal with potentially significantly longer construction delays beyond the (usual nightmare) of construction delays?
I have a basement project I was expecting to be completed in April, but now is on track to be finished in August (crossing my fingers), and this is because my contractor no longer, from an ethical and crew management standpoint, was willing or able to send crews larger than 2 at a time because he also wanted to manage their risk level of exposure. Whereas in the past he could send in an army of 5-10 at any given time to get things to be completed, this is no longer an acceptable risk, so it has significantly slowed things down and I do not blame him.
I would sideeye hard any assurances that no timelines have changed compared to COVID - I'd want to ask a lot of questions about what's changed about their construction practices to ensure crew safety.
posted by Karaage at 9:59 AM on July 31, 2020
1) Financial risk - if either of you lose your job, would you be able to sustain the payments to finish the renovation in the interim? What if you both lose your jobs? If the answer is no, don't go through with it.
2) Construction timeline stretching - What are the timelines from the design-build firm? Have they changed at all since COVID? Are you willing to deal with potentially significantly longer construction delays beyond the (usual nightmare) of construction delays?
I have a basement project I was expecting to be completed in April, but now is on track to be finished in August (crossing my fingers), and this is because my contractor no longer, from an ethical and crew management standpoint, was willing or able to send crews larger than 2 at a time because he also wanted to manage their risk level of exposure. Whereas in the past he could send in an army of 5-10 at any given time to get things to be completed, this is no longer an acceptable risk, so it has significantly slowed things down and I do not blame him.
I would sideeye hard any assurances that no timelines have changed compared to COVID - I'd want to ask a lot of questions about what's changed about their construction practices to ensure crew safety.
posted by Karaage at 9:59 AM on July 31, 2020
We are waiting. We don't yet have the plans but our thought is that the sell/buy vs remodel calculus may change (eg bigger houses may get cheaper, entry-level are more likely to stay steady) and prefer the savings buffer.
posted by typecloud at 10:37 AM on July 31, 2020
posted by typecloud at 10:37 AM on July 31, 2020
Whereas in the past he could send in an army of 5-10 at any given time to get things to be completed, this is no longer an acceptable risk, so it has significantly slowed things down and I do not blame him.
This is kind of surprising to me, as most of the brand new houses are legitimately built with small crews of 2-3, and the major remodel we did, the only day there was more than 2-3 people in our house at a time was when they lifted a very heavy beam into our ceiling, and at walk-thru when the plumbing and electrical leads where there.
The rest of the time, just 2-3 person crews do most of the work. I'm looking out the window at a brand new duplex being built with a crew of 3 doing the exterior framing.
I would also not do this work with any debt, but if you had the cash in hand, then I would feel comfortable doing this work now. There are some materials availability issues, but they can be managed.
posted by The_Vegetables at 10:47 AM on July 31, 2020 [1 favorite]
This is kind of surprising to me, as most of the brand new houses are legitimately built with small crews of 2-3, and the major remodel we did, the only day there was more than 2-3 people in our house at a time was when they lifted a very heavy beam into our ceiling, and at walk-thru when the plumbing and electrical leads where there.
The rest of the time, just 2-3 person crews do most of the work. I'm looking out the window at a brand new duplex being built with a crew of 3 doing the exterior framing.
I would also not do this work with any debt, but if you had the cash in hand, then I would feel comfortable doing this work now. There are some materials availability issues, but they can be managed.
posted by The_Vegetables at 10:47 AM on July 31, 2020 [1 favorite]
Best answer: On what you've said, I would probably not proceed, and I know that sucks. Setting all the covid stuff aside, you're at risk in both your cash position and your employment. A realistic worst-case scenario would be: One of you (the higher earner) loses their job for 12 months and your location has a covid outbreak and discretionary construction is halted entirely for 1-3 months drawing out the construction timeline and adding 4 months to the project. Could you survive that easily? If so, I might manage to talk myself into the risk - but you need to be brutally honest with yourself about it.
One thing you didn't mention but should look into are the loan terms. Loan rates across the board are extremely low right now, but if this is a construction loan you might end up with the additional problem of the bank pushing for completion regardless of delays.
Something else to think about - in every realistic scenario, is this the place you want to live? If you are in industries where work from home is common, would you continue to live in your current location if work from home becomes the norm? What if school were virtual for a year? What if someone offered you 20% more than your house is worth, as-is? Flexibility has value, but only you know how much it has to you.
posted by true at 11:19 AM on July 31, 2020 [1 favorite]
One thing you didn't mention but should look into are the loan terms. Loan rates across the board are extremely low right now, but if this is a construction loan you might end up with the additional problem of the bank pushing for completion regardless of delays.
Something else to think about - in every realistic scenario, is this the place you want to live? If you are in industries where work from home is common, would you continue to live in your current location if work from home becomes the norm? What if school were virtual for a year? What if someone offered you 20% more than your house is worth, as-is? Flexibility has value, but only you know how much it has to you.
posted by true at 11:19 AM on July 31, 2020 [1 favorite]
This scenario would have me rethinking the benefits of uprooting myself and my family for such an extreme remodel, vs just selling and buying a new house.
posted by JenMarie at 11:50 AM on July 31, 2020
posted by JenMarie at 11:50 AM on July 31, 2020
So I have several co-workers who are in the middle of home renos and they're perfectly happy. Our neighbour across the street got a brand new roof just yesterday. I'm scheduled to xeriscape the front lawn and get a new driveway poured in the fall. It's fine, the trades people need the work like anyone, although locally construction is booming - I talked to a flooring guy who said he hasn't been this busy in years.
But there's only one phrase in your question that matters:
"our employment is precarious"
So don't do it. That's all there is to it. I work for a big silicon valley company and everyone I just described has more work than they know what to do with. And the sweet old lady across the street is like 85 and pays like $500 a year in property tax so honestly money isn't her #1 concern in the world.
At times like this it's a good idea to "keep your powder dry." Plus you're stuck inside - home construction sucks! When we've done home renos I got out of the house as much as possible - the office, the mall where ever. Places that I no longer go to. Even if you're moving to a new place, it's probably smaller and that may be tough as we're all locked down. Although maybe where you live isn't locked down? So maybe it's OK?
All that said, I don't know how precarious your jobs really are. If you're not likely to be laid off, now is as good a time as ever. But if things really are that uncertain, no, don't do it.
posted by GuyZero at 11:52 AM on July 31, 2020 [3 favorites]
But there's only one phrase in your question that matters:
"our employment is precarious"
So don't do it. That's all there is to it. I work for a big silicon valley company and everyone I just described has more work than they know what to do with. And the sweet old lady across the street is like 85 and pays like $500 a year in property tax so honestly money isn't her #1 concern in the world.
At times like this it's a good idea to "keep your powder dry." Plus you're stuck inside - home construction sucks! When we've done home renos I got out of the house as much as possible - the office, the mall where ever. Places that I no longer go to. Even if you're moving to a new place, it's probably smaller and that may be tough as we're all locked down. Although maybe where you live isn't locked down? So maybe it's OK?
All that said, I don't know how precarious your jobs really are. If you're not likely to be laid off, now is as good a time as ever. But if things really are that uncertain, no, don't do it.
posted by GuyZero at 11:52 AM on July 31, 2020 [3 favorites]
I would hold off for a bit and watch for construction costs to tank at some point and then be ready to pull the trigger. Materials have been incredibly expensive for years. Eventually this depression will cause demand and costs drop. A little patience could save you a lot of money.
posted by trbrts at 11:55 AM on July 31, 2020
posted by trbrts at 11:55 AM on July 31, 2020
This week I've had someone at my house building a small deck and fence extension, and he's had several delays because materials are difficult to source right now. It hasn't been an issue to me because I'm not in a terrible rush and it's a small project that can easily be set aside for a few days until he can get the materials, but if this were a large remodel that required me to be out of the house it would be a whole other issue.
posted by shornco at 1:41 PM on July 31, 2020
posted by shornco at 1:41 PM on July 31, 2020
Best answer: I would not do this now. We just made it through a down-to-the-studs kitchen remodel, and the uncertainty of what might happen if one of the team got Covid, if city/state shutdowns prevented work or inspections, if materials/appliances/etc were delayed, etc. was a constant stressor on top of the usual 2020 daily cortisol pump. I’m certainly glad we did it, because ultimately everything was fine, but we only plowed on because the project was substantially underway before Covid really hit the U.S.
The only upside I can see to doing it now is that rates really can’t get much lower. The downside is that the pandemic will not be over in October, you are committing all your savings, may lose your jobs, and will have to move—with a small child—to temporary lodgings. In a pandemic. It’s almost inevitable that something unplanned will happen, and the project will cost more and take longer. You may then have to stay in temporary accommodations longer, at additional expense. And I don’t think it’s paranoid to note that on top of all that, your proposed construction schedule spans the presidential election and subsequent (hopefully) lame duck period leading up to the inauguration, which could be a significantly weird and disruptive time.
posted by mumkin at 1:44 PM on July 31, 2020 [2 favorites]
The only upside I can see to doing it now is that rates really can’t get much lower. The downside is that the pandemic will not be over in October, you are committing all your savings, may lose your jobs, and will have to move—with a small child—to temporary lodgings. In a pandemic. It’s almost inevitable that something unplanned will happen, and the project will cost more and take longer. You may then have to stay in temporary accommodations longer, at additional expense. And I don’t think it’s paranoid to note that on top of all that, your proposed construction schedule spans the presidential election and subsequent (hopefully) lame duck period leading up to the inauguration, which could be a significantly weird and disruptive time.
posted by mumkin at 1:44 PM on July 31, 2020 [2 favorites]
I like clew's idea of scaling back the scope if possible but yeah, ideally you would not be getting into real debt for anything less than an emergency right now. The low rates on loans thing is compelling -- I know it has made me question my reluctance to buy a condo -- but realistically they aren't going up anytime soon.
posted by We put our faith in Blast Hardcheese at 2:30 PM on July 31, 2020
posted by We put our faith in Blast Hardcheese at 2:30 PM on July 31, 2020
Personally I would not drain savings and take on debt right now unless this was a serious livability issue (like, roof is leaking, heat doesn't work, basement is a swimming pool, etc.).
posted by Dip Flash at 4:36 PM on July 31, 2020
posted by Dip Flash at 4:36 PM on July 31, 2020
Any reason not to wait until March or April to start construction? Gives you more time to save money.
posted by perdhapley at 11:05 AM on August 1, 2020
posted by perdhapley at 11:05 AM on August 1, 2020
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I would give it at least six months to see how things are shaking out before embarking on something like this.
posted by Tell Me No Lies at 9:09 AM on July 31, 2020 [16 favorites]