Lorena Fortuna, right, and her husband Anderson, holding their daughter Valentina, look at patio furniture at the Jordan furniture store in Reading, Mass., on Friday, June 7, 2019.
Gregory Rec | Portland Press Herald | Getty Images
Demand for home renovations has increased dramatically over the past two years as Americans hunkered down in their homes and saw anything in need of an upgrade.
Now inflation has increased the prices of many goods that people want for a home renovation.
Prices of all household items rose 1.6% month-on-month in January and rose 9.3% year-on-year, according to the latest CPI released by the US Department of Labor on Thursday. The new data showed that inflation rose more than expected and prices of household furniture rose even faster than other goods:
- Flooring: 0.8% MoM, 7.2% YoY
- Window Coverage: 1.8% MoM, 16.2% YoY
- Furniture/Linens: 2.4% MoM, 17% YoY
- Bedroom Furniture: 1.8% MoM, 13.7% YoY
- Watches, lamps and decorative items: 2.7% m/m, 6.3% y/y
- Living Room/Kitchen/Dining Room Furniture: 2.2% MoM, 19.9% YoY
- Household appliances: 1.5% m/m, 8.5% y/y
Price spikes hit as demand for home upgrades increases.
Home improvement spending is up 28% in 2021 from 2020, according to a recent report by Angi, a home remodeling website. The average homeowner spent $10,636 on an average of 3.7 projects.
The average spend is the highest since Angi started tracking it seven years ago.
“With an increased focus on home ownership due to the pandemic, home prices rising to an all-time high (nearly 20% YoY) and material prices in some cases 400% or more above pre-pandemic levels, The Strong Growth in overall home improvement consumer spending should come as no surprise,” writes Mischa Fisher, chief economist at Angi, in the report.
Shares of home remodeling retailers like Lowe’s, Home Depot, Masco, and Sherwin Williams have all risen sharply over the past year. But they are off their highs so far this year as inflation and rising mortgage rates hurt home remodeling. People tend to upgrade furnishings after remodeling.
A recent report from Harvard’s Joint Center for Housing Studies predicted big jumps in home remodeling earlier this year, followed by a peak and then a slowdown to a more sustainable growth rate.
“The rising costs of labor and building materials, difficulties in retaining contractors and rising interest rates could discourage owners from undertaking new or larger remodeling projects,” said Abbe Will, associate project director of the Remodeling Futures Program at HJCH.
Clarification: This story has been updated to clarify that living room/kitchen/dining room furniture prices are up 19.9% YoY.