As a licensed general contractor, I am frequently pinged by friends wanting construction “advice.” One recent query was from an acquaintance looking to update their kitchen. We built a dream list factoring in everything they wanted and then sent them out shopping.
A few days later, they sent me an email. “We’re speechless,” they stated, adding, “We had NO idea how expensive things have become — the basic costs are WAY beyond our budget — and that’s without factoring in financing, permits and the ridiculous cost of appliances.”
Translated: “Sticker shock.” As in, “Didn’t see that coming … ”
Home improvement costs and insights from Angi
Angi’s 2026 State of Home Spending Pulse echoes this sentiment, declaring, “Homeowners are prioritizing essential projects while planning for the future.”
They add, “Homeowners are scaling back, not stepping away. Angi’s latest State of Home Spending Pulse finds rising costs are leading homeowners to take on less discretionary projects while essential repairs and maintenance take priority — and confidence in future home investment remains strong.”
In other words, due to soaring renovation costs, homeowners are prioritizing maintenance over large improvements. An Angi survey asking the question, “You indicated you had to put off or cancel a home project which you were planning to do in the last 30 days. Why did you put off this project?” revealed that 54 percent stated costs were too high, while 32 percent focused on other personal priorities.
The same survey asked, “Which of the following have you done to your home over the last 30 days?” Sixty-three percent stated they had done maintenance and 58 percent indicated repairs, while only 35 percent revealed they had done renovations.
Why are costs so high now?
What is pushing renovation costs higher? Let’s begin with labor: The National Association of Home Builders (NAHB)is citing a dwindling pool of skilled labor who, due to demand, can charge almost anything they want.
The cost of labor also feeds directly into the cost of producing construction materials in the U.S. and often significantly outweighs the actual cost of the raw materials.
The NAHB also states that when it comes to building products that are imported, including appliances, electrical components, plumbing fixtures, hardware, flooring, metal products and more, the current tariffs and trade policies have increased typical remodeling material costs by 6.9 percent.
Next would be the cost of fuel: Residential construction and remodeling costs are directly tied to transportation costs, which in turn hinge upon the price of related fuels. With the current war in the Middle East pushing fuel prices higher, inflation is up, which is also reducing the likelihood of any reductions in interest rates in the short term.
Insurance must also be included. Thanks to increases in natural disasters, property insurance is way up. What many fail to realize, however, is that increases in the rates for workers’ compensation, general liability, subcontractor’s policies and general contractor’s risk insurance have to be factored in as well.
If you have tried to pull a building permit lately, you may be alarmed at the dramatic increases in fees coupled with significantly higher levels of compliance to keep up with current building codes. This means the amount of documentation required by any given municipality has increased, along with the actual length of time required to obtain the necessary permits.
Ironically, the cost of renovations, while high, does not mean that renovation plans are being canceled. It simply means the projects are being pushed down the road.
Sixty-six percent of those surveyed by Angi stated they were planning a major investment within five years. They still want to do the work to improve their standard of living; they are simply taking more time to pull together a plan, including how they hope to raise the funds to pay for the desired upgrades.
All of this reveals 2 implications for residential real estate
First, the costs of renovation and upgrading homes before putting them on the market have soared, increasing seller pushback. Whereas a few short years ago you could refresh a kitchen for less than $10,000, in regions such as the San Francisco Bay Area that number is laughable.
It is now common for sellers to invest north of $100,000 to get their homes in shape for the market. In previous markets, sellers could expect to reap $2+ for every $1 invested; those margins are getting slimmer as costs increase.
As an example, a home selling for $1 million may have had $100,000 or more put into it to make it market-ready. Some sellers — as costs increase — want to forgo renovations and, using the previous example, drop the price to $900,000.
While this makes sense on paper, buyers in the San Francisco Bay Area want turnkey homes. As such, they will pass on homes in original condition and gladly pay more for move-in-ready properties.
They think that by the time they get around to doing the necessary upgrades to bring the home to their level of expectations, permits, materials and labor costs will have escalated significantly past the originally estimated $100,000. Better in their mind to have the seller do it before they sell.
Second, with significant numbers of homeowners stating they plan to do renovations in the future, this signals their intent to stay in their homes for the long haul. We have already seen high interest rates lock in sellers who otherwise might have considered selling; now we see a trend towards improving their current home in lieu of relocating.
Raf Howery, CEO of Kukun, wrote a post on LinkedIn explaining a trend happening in Washington state that may be a precursor of things to come. He explains, “The median home getting an addition in the state of Washington last week was built in 1958.”
He further states that 8.7 percent of the permits filed in the state were to increase the home’s square footage. He clarifies, “That’s the stuck homeowner, made visible. When moving is expensive, people build up and out instead of trading up.”
We are charting new waters with increasing headwinds: As costs increase, expect more homeowners to hunker down for the long haul.
Carl Medford is the CEO of The Medford Team.
