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Pros and Cons of Remodeling During a Recession

August 17th, 2022 | 4 min read

By Michael Flory

Pros and Cons of Remodeling During a Recession (Financing Options Available)

National economic conditions often fluctuate and recessions occur. During these times, money is probably tight for your family. And cutting back on unnecessary purchases might be needed to keep up with everyday expenses. We do the same thing.

You might have been planning and budgeting months in advance for a large purchase, such as a home remodel, that all but seems impossible now due to a recession. A remodel can be expensive, and often, there are more important things to be spending your money on than putting in that brand-new hot tub you have been dreaming about.

As a remodeler who was actively designing and remodeling during the 2008 housing crisis, we understand that not everyone is in the same economic position and home remodeling during a recession is not advised for everybody.

By the end of this article, you will know the pros and cons of remodeling during a recession as well as some financing options available to pay for your remodel:

Pros of Remodeling During a Recession

Increased enjoyment 

This seems like a given, but remodeling your home to your exact liking will increase the level of enjoyment you get out of your home. 

Increase your home’s value (in case you want to sell)

In the event you are looking to take advantage of the current housing market, remodeling will increase the value of your home before you sell it.

Updating the fixtures, modernizing the style, or making additions to the home are great ways to boost your home's value before selling. In the current market, the ROI you put into your home for a remodel will be easily recouped by the increase in home value.

Extra rooms to help out grandparents or kids coming out of college

Often, 401k and retirement accounts take a hit during a recession. For those just about to retire, this can put the brakes on retirement plans.

Remodeling your basement can help those in that position. This isn’t viable for everybody, but for those who want to help it can be a rewarding task.

In addition, your kids may be coming home from college and have difficulty finding a job. Remodeling your basement can help them so they don’t need to get an apartment post-grad.

Cons of Remodeling During a Recession

Remodeling can be expensive

This is no surprise. Remodeling your home can be expensive, especially if you are updating major sections of your home.

During a recession, saving your money or only making necessary expenses might be the responsible move for your family.

Unstable Income (In case you lose your job)

Home remodels can take months to complete and your employment status may change during a recession. This will negatively impact your income and your ability to pay for a remodel once it has begun.

Prices of building materials increase (inflation)

The cost to remodel might change drastically from month to month due to the increase in building materials. A budget you might have had months ago might not be accurate anymore due to a price increase in building materials.

How to Pay for a Remodel (And Financing Options Available)

There are several options available to pay for a remodel during a recession. Discuss with a financial advisor to see if any of these will work for you and your family:

Using your home’s equity to pay for a remodel

Paying for a large home remodel can be a question that concerns many families. Especially during a recession, many are unsure about how to pay for it.

For families who haven’t paid enough into their mortgage, this option to pay for a remodel is likely not viable for you.

For those who have been in their homes for a long time, and have built up equity, you can use that equity to take out a loan and use that to pay for a remodel.

You get the remodel you want, and use your home’s equity to pay for it. An added benefit of this option is that by remodeling your home, you increase your home’s value, (increasing your equity further)

Cons of using your home equity loan

  • Home might be used as collateral for the loan in many cases

  • The loan may be larger than the original remodel budget, spending the loan on unnecessary expenses

  • These loans come with additional closing costs and fees

Home Improvement Loan (unsecured personal loan from a bank)

Banks will offer some sort of unsecured personal loan for you to use for home remodels.

This is a good option to use for a home remodel during a recession because interest rates are low and borrowing money to remodel your home will often return more in home value than the loan amount.

Trade-offs of using a home improvement loan

There are three main cons:

  • Each lender has different repayment policies and repayment schedules

  • Each loan will have different interest rates

  • Your credit score may determine loan amount and APR

Next steps to remodeling during a recession

In times of economic uncertainty, the decision to remodel your home can be a challenging one. We've explored the pros and cons of undertaking such projects during a recession, reminding you of the unique considerations that come into play.

While a recession can bring about financial constraints and uncertainties, it's important to remember that remodeling during this period isn't without its advantages. With careful planning, budgeting, and a focus on essential upgrades, you can make smart decisions that enhance your living space and potentially increase your home's value.

At Custom Built, we understand that every homeowner's situation is unique. Our experienced team of 15+ years is here to guide you through the remodeling process, offering expertise and insights tailored to your specific needs and goals.

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Now that you've learned more about the pros and cons of remodeling during a recession, let's explore how to approach the first steps of planning your project:

Michael Flory

Michael brings over 2 decades of building and remodeling experience to his position as the Owner and Visionary of Custom Built. Michael’s passion to make an impact on the home building industry has led him to serve for over ten years at the local and state Home Builders Association, culminating as President of the HBA of Michigan in 2020.