Key takeaways:
- Factors such as the pandemic, labor shortages, and supply chain disruptions have driven up the prices of goods and services in the home maintenance industry, resulting in higher costs for homeowners and property managers.
- The costs of heating, ventilation, and air conditioning (HVAC) systems experienced a staggering 20% price increase from 2021 to 2022 due to supply chain disruptions. This increase in HVAC costs illustrates how specific sectors within home maintenance can be particularly affected by economic factors.
- Some metropolitan areas saw substantial increases in average annual maintenance costs, while others experienced declines. These regional disparities pose challenges for homeowners and property managers as they navigate the changing landscape of home maintenance expenses.
- Homeowners and property managers can reduce expenses by adopting proactive measures such as self-diagnosis and correction of minor issues.
In this Poplar Propcast episode, Maintenance and Inflation, Justin Lieberknecht, VP of Marketing at Poplar Homes, sets the stage for a riveting conversation about the pressing issue that has been keeping homeowners and property managers up at night: the relentless surge in home maintenance costs, driven by the relentless tide of inflation.
In this blog post, we will delve into the key insights from Justin’s discussion, using his quotes as anchors, and explore the profound implications of these skyrocketing costs on homeowners and property management companies alike.
Inflation in goods and services
“During the pandemic, there were a lot of pressures put on various factors in the supply chain. We had a labor shortage. We had a pandemic. And that’s, in large part, because people couldn’t go out and work, especially when it’s a service call to a house. We had supply chain issues where we had parts that we couldn’t get.”
Justin hits the ground running by acknowledging the proverbial elephant in the room: inflation. The pandemic, labor shortages, and supply chain disruptions have conspired to drive up the cost of goods and services across various industries, including home maintenance. These factors created a perfect storm, disrupting the supply chain, causing labor shortages, and ultimately driving up costs.
“Looking at those inflation rates, there’s a couple of places online you can see how they kind of rolled through. There’s one that’s put together, it’s a consumer price index, but it’s specifically for household furnishings and maintenance.”
As Justin delves deeper into the subject, he highlights the existence of a specific Consumer Price Index (CPI) tailored to household furnishings and maintenance. Traditionally, this sector of the economy was renowned for its stability. From 2018 to early 2021, inflation averaged a modest 1-2%. However, the pandemic brought forth seismic changes. Year-over-year inflation rates skyrocketed, exceeding 5% and frequently surging to the 8-10% range. While the current rate has dipped below 5%, it’s important to recognize that the previous surges still affect current prices, leaving homeowners and property managers grappling with inflated maintenance costs.
Inflation affecting HVAC
Justin’s analysis doesn’t stop at the broader spectrum of home maintenance. He zeroes in on heating, ventilation, and air conditioning (HVAC) systems, revealing a startling trend. From 2011 to 2018, HVAC maintenance costs remained relatively steady. However, the proverbial dam broke in 2021 and 2022, with costs skyrocketing. An HVAC system purchased in 2022 was a whopping 20% more expensive than its 2021 counterpart. The culprit? Supply chain disruptions wreaking havoc on the HVAC industry.
“The problem though is that in ‘21, it jumped up to 8%, and in ‘22, it jumped up to 20%. So, an HVAC that you bought in 2022 is gonna be 20% more expensive than one you bought in 2021. It’s just this giant growth in its prices across that time period. So HVAC systems really got hit by the supply crunch, because they get parts from all over the world, they’re assembled at different places, and then things hit HVAC really hard and made them very expensive to purchase in 2022.”
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Inflation in home maintenance
“Now, the other side of this is not buying furnishings to set up your house, not buying HVACs, but really the maintenance portion of it.”
Transitioning from the realm of purchasing new components to maintaining existing ones, Justin delves into the world of home maintenance.
“Thumbtack is a website where you can post smaller jobs and find a vendor to do them… This data looks at more than a million essential home maintenance projects and provides insight into the annual cost of maintaining.” Justin said as he turned our attention to Thumbtack, a platform that shed light on the annual cost of essential home maintenance projects.
In Q1 2023, Thumbtack reported an alarming year-over-year increase of 8.8% in the average annual cost of home maintenance, soaring $521 above the previous year. While townhomes and condos maintained some stability, single-family homes experienced a significant uptick in maintenance costs.
“In 2023, the first quarter, they’ve seen home maintenance prices rise across the board–16 out of the 17 home maintenance categories, increasing in cost compared to the same time last year.”
Thumbtack’s report left no room for doubt. Home maintenance costs are surging. Sixteen out of seventeen home maintenance categories witnessed price hikes, painting a grim picture of the challenges homeowners and property managers face.
Geographical variations
Justin shines a light on geographical disparities in home maintenance costs. While home maintenance costs have been rising across the nation, the degree of increase varies by region. Thirty-one of the top 40 metropolitan areas saw an uptick in average annual maintenance costs, while nine experienced a decline. These regional variations present a complex challenge for homeowners and property managers as they navigate this turbulent landscape.
“Home maintenance costs rose nationwide. 31 of the top 40 metropolitan areas saw an increase in the average annual cost. That means nine dropped.” he said. “So the highest average annual cost was in L.A. and that’s $8,641, a 20% change year-over-year. You’ve also got Chicago, Boston, and Seattle. New York saw an almost 5% decrease in its year-over-year change, but it’s still the 5th most expensive place for average annual maintenance costs. Portland, Oregon is number 6, and it went down 12%. So it used to be clocking in at like number 3 or 4, and now it’s just at number 6.”
Responsibilities of homeowners in maintenance
While some maintenance costs may be borne by homeowners, Justin continues the discussion by emphasizing the importance of distinguishing between expenses incurred due to natural events (covered by insurance) and those resulting from regular wear and tear.
Justin also addresses an essential aspect of home maintenance: the division of responsibilities between homeowners and property managers. It’s crucial to differentiate between expenses resulting from natural events—typically covered by insurance—and those stemming from regular wear and tear. Neglecting maintenance issues can lead to costly repairs, underscoring the importance of proactive management.
Making these costs bearable
As the Propcast episode nears its conclusion, Justin offers a ray of hope in the face of soaring maintenance costs. Homeowners and property managers can adopt strategic approaches to manage these expenses effectively. Self-diagnosis and correction for minor issues, along with the collection of detailed information for accurate service quotes, can go a long way in minimizing the financial burden.
“One of the approaches we’ve taken that’s been helpful is trying to do self-diagnosis and correction as much as possible. That involves one of our people on the phone with the resident in the home trying to walk them through stuff that may be simpler, and that’s things like garbage disposals. We don’t necessarily need to send somebody out to redo a garbage disposal if it’s clogged or if it’s popped its circuit. We can walk them through that over the phone.”
You can also attempt to gather sufficient information to make an accurate estimate without requiring sending a vendor out to physically inspect it. “And so as we build out our property tracking systems, when somebody reaches out and tells us that there’s a roof issue if we have looked at that roof before or worked with a company that worked with it before, we have a better idea of how to quote that,” Justin elaborated.
He then continued emphasizing the importance of minimizing the number of times you need to call and send a vendor out for a quote can help you get a better price.
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Concluding thoughts
As Justin Lieberknecht eloquently pointed out in this Propcast episode, inflation’s relentless march has left no corner of the economy untouched, including home maintenance. The implications of these rising costs are profound for homeowners and property management companies alike.
To weather this storm, it is crucial to stay informed, prioritize maintenance, and explore innovative strategies that ensure homes remain in good condition without eroding budgets. As the real estate market continues to evolve, adapting to these changing maintenance dynamics will be paramount to preserving property value and securing a sound return on investment.
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