How Expensive tracks measurements of California's completely unaffordable real estate market.
The pain: Home repair inflation in California has more than doubled in the last five years.
The source: My trusty spreadsheet reviewed the California portion of the Verisk Remodel Index. These insurance industry advisors “track the cost of 31 different categories of home repairs, covering over 10,000 line items ranging from appliances to windows.”
The pinch
According to Verisk, typical repair costs in California have increased 40% in the last five years, compared to an increase of 16% in the previous five years.
By the way, it's not unique to Golden State. Nationwide, repairs have been 40% more expensive since 2019 and have increased 15% in the last five years.
Painful points
First, consider total construction wages, which are tracked by a federal index. Verisk says they currently account for 62% of repair costs in California.
The average weekly wage for a California construction worker rose 21% in the five years ending in June. In comparison, the increase over the last five years was 17%.
The biggest concern with the repair was the skyrocketing cost of materials used in construction. Everything from pandemic-related shortages to the construction boom at the time — remodels and new units — drove prices up.
A federal index of wholesale prices for all building materials rose 38% in the five years through September. That's a radical change from the 9% gains over the past five years.
One slice
Home repairs are another cost of living expense.
Consider overall U.S. inflation over this period, as seen in the Consumer Price Index: It rose 23% in five years, compared to just 8% in 2014-19.
Need I remind anyone about California real estate values? They have risen 47% in five years, compared with a 33% gain in 2014-19, as measured by a federal price index.
And repair costs also explain rising home insurance rates – assuming someone could insure your home!
According to the Little Hoover Commission, typical premiums in California rose 40% in the five years ending in 2021. In the last five years, interest rates have only increased by 3%.
Conclusion
For those ready to call a contractor, the worst could be over. Consider last year’s repair inflation.
The Verisk report shows that repair costs in California increased just 3% over the past 12 months. Nationwide it is an increase of 4%.
Yes, it's still rising – just more slowly.
The relief in construction prices can largely be attributed to utility costs, which fell 3% last year, according to U.S. wholesale price index calculations.
But labor remains expensive. The California wage index shows construction labor costs rose 4% last year.
Jonathan Lansner is a business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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