We are in the midst of a strange economy – meaning no one is confident about what to expect in 2023. Fears of a recession are looming large, and even though home prices are falling, potential buyers are hesitant to pull the trigger.
Inflation and loan interest rates in a slowing real estate market may mean the remodeling industry could get a boost, but coming off a year like 2022 where investments saw their worst performance since the 2008 financial crisis, available assets may be limited.
In spite of the confusion, how much will you want to budget for remodeling in the coming year? Let’s take a look.
Article Sections
Renovation Trends in 2023 Cost to Build an Addition Factors That Affect Renovation Costs Exterior Remodeling Costs
Budgeting for Your 2023 Renovation Remodeling Price Ranges
Renovation Costs by Project Size DIY vs. Contractor Pricing
Renovation Costs by Project Type How to Save Money on Home Renovations
Bathroom Remodeling Costs The Bottom Line
Renovation Trends in 2023
Marketplace uncertainty is causing some to predict an increase in home renovation projects, but the remodels may be smaller than what homeowners have pursued in less turbulent times.
Interior design changes, updating spaces, and getting creative with the home’s current footprint will surpass rebuilding or building additions.
Factors That Affect Renovation Costs
Supply chain issues and labor shortages are still at play in 2023. Lumber prices should stabilize but won't be returning to pre-pandemic levels and will fluctuate with demand. The cost of building materials overall, however, is slowly rising.
Budgeting for Your 2023 Renovation
Your primary consideration in budgeting for a renovation is sufficient return on investment (ROI). The return may be far less than what you spend depending on your home’s location, the project type, the real estate market, and the timing.
ROI is important in a home renovation as it is the only method of investing that gives you two types of value: the actual ROI and improved quality of life with a new space in your home. By renovating, you are putting work into an appreciating asset that. Depending on when or if you sell your home, that money will stay with you.
On average, home renovations provide a 70% ROI. If you plan on staying in your home long-term, however, you have more wiggle room. The longer you stay in place, the higher the return if your renovations stand the test of time. In other words, go for traditional/classic renovations over trendy or luxury ones. Quality craftsmanship will garner the highest return.
There is no tried-and-true mathematical formula for calculating the ROI for home improvements. The only effective way to calculate home value is with an appraisal. This is usually only done when you’re buying and selling a home, so it might be tough to correlate the calculated value with a renovation project to see how they impact the value.
The trend for 2023 is leaning toward minor renovations, such as individual room remodeling or updating spaces. Expect to spend more on the same home improvement projects than you would have before the pandemic.
Renovation Costs by Project Size
Ironically, the smaller your renovation project, the more it will cost per square foot. This is because there is not as much space to divide out non-material costs like labor, fuel, and transportation. A whole-house remodel will cost between $15 and $60 per square foot, while a single kitchen or bath remodel can have a price tag of $100 to $250 per square foot. Putting an addition on your home runs between $90 and $200 per square foot.
Renovation Costs by Project Type
Despite higher per-square-foot pricing than whole-house renovations, smaller projects cost less overall, which could make them more appealing in an uncertain financial environment.
Individual Project Costs
Here are some average prices forecasted for upgrading individual home features in 2023:
Flooring: $7,500
Roofing: $9,000
Painting: $3,000
HVAC upgrades: $8,000
Plumbing upgrades: $4,000
Electronics: $3,000
Window replacement: $2,000
Bathroom Remodeling Costs
Bathrooms are one of the most popular targest for remodeling. The average bathroom remodel cost is around $10,000 but can range from $2,500 to $30,000 depending on the scope of the project and your choice of fixtures and amenities. Here's how the average material prices break down for each category.
Labor: $2,800
Flooring: $3,000
Plumbing work: $1,000
Fixtures and vanity: $5,000
Shower: $3,000
Paint: $50
Cabinets: $300