The annual pace of rising home repair and remodeling costs eased in the third quarter to match the pace of inflation over that period “for the first time in recent memory,” according to a new report from property market analytics firm Verisk Analytics.
Third-quarter updates to the Verisk Repair and Remodel Index, which tracks costs on more than 10,000 line items ranging from windows to appliances, show repair and remodeling costs rose 3.07% from a year ago, in line with consumer price index growth over that period. Repair and remodeling costs rose 0.57% from the second quarter.
“If the current trajectory of cost increases continues,” Greg Pyne, vice president of pricing for Verisk Property Estimating Solutions, said in the report, “this could be good news for property owners, contractors and real estate investors.”
Of the nine census divisions in the U.S., the South Atlantic, East North Central and West North Central observed the largest annual appreciation in repair and remodeling costs, up 3.25%, 3.21% and 3.2%, respectively, over the year.
The New England, East North Central and Pacific divisions observed the largest quarterly increases, rising 0.88%, 0.8% and 0.76%, respectively.
At the state or equivalent level, Washington, D.C., led the U.S. with the largest quarterly gains in repair and remodeling costs, rising 3.76% compared to 1.95%, 1.79% and 1.66% in the states with the next largest increases: Delaware, Utah and Kansas.
Rising labor costs account for most of the annual and quarterly increases, according to Verisk, with the anticipated impact of Trump administration tariff policies “not apparent in material costs.”
As a share of a project’s overall budget, labor costs accounted for an average of 63% in the third quarter. However, that percentage varies widely between repair and remodeling categories.
Labor accounted for 39% of the total job cost of building out a deck with railings but 80.8% of the total cost to seal, prime and paint an entire house, and about 75% of the cost to remodel a full bath.
Tariffs are the linchpin of a protectionist trade policy levied by the Trump administration to reconstitute a U.S. industrial base that has been in decline for decades.
The current 18.2% average statutory tariff rate is the highest level since the early 1930s, according to the Budget Lab at Yale.
The rollout of President Donald Trump’s signature “reciprocal tariffs” has been piecemeal, however, owing to a fit of false starts and delays that provided U.S. trading partners a window to negotiate friendlier terms with the administration.
Real estate investors, for their part, have reported that tariffs are hurting their profitability, despite Verisk reporting that the import taxes have not emerged in material costs.
New tariffs on goods imported from Canada, Mexico and China, for example, led more than half of respondents to an RCN Capital survey to report increased construction costs. The survey by the investor-focused mortgage lender found that 36% of respondents reported supply chain disruptions and materials shortages and 33% reported reduced net income margins.
Verisk data shows home repair and remodeling costs have risen almost 67% since the third quarter of 2015 and 75% since the index began in the first quarter of 2013.
