Most Home Renovations Go Over Budget—Here’s Why

Labor Shortages and Rising Wages

The U.S. construction industry has been grappling with a severe labor shortage since the pandemic, and 2024 has only seen the problem deepen.

According to the Associated General Contractors of America’s 2024 workforce survey, 85% of contractors reported difficulty filling both salaried and hourly craft positions. These shortages force companies to pay higher wages to attract skilled workers, with average construction wages rising by 6.1% in 2024 compared to the previous year.

This wage inflation often blindsides homeowners who budget using outdated labor cost estimates. In addition, project timelines are stretched as fewer workers are available, which can trigger overtime charges.

The Home Improvement Research Institute noted that labor costs have outpaced materials inflation for the first time since 2020. As a result, even seemingly straightforward renovations like kitchen remodels can run 18–30% over original budgets, largely due to labor unpredictability.

Homeowners who fail to account for these increases often find themselves with empty pockets before the work is done.

Supply Chain Disruptions and Material Price Volatility

Material costs remain a wild card for renovators in 2024. The National Association of Home Builders reported that the price of key construction materials—such as lumber, drywall, and copper—rose by an average of 9% in the past year.

Delays at international ports, ongoing trade disputes with China, and climate-related disruptions have made it difficult to secure everything from tiles to insulation. For example, global shipping slowdowns in early 2024 pushed the average delivery time for custom cabinets from 8 to 14 weeks, according to a report from Houzz.

When materials are delayed or prices jump unexpectedly, contractors often pass the extra costs on to homeowners. Even small mid-project changes, like switching tile brands due to availability, can trigger budget overruns of $3,000 or more.

Homeowners rarely have the luxury of waiting for prices to stabilize, so they’re forced to pay premium rates or risk further delays.

Underestimating Scope and Hidden Problems

One of the most common reasons renovations go over budget is the discovery of unexpected issues once the walls come down. A 2024 HomeAdvisor survey found that 53% of homeowners experienced “surprise” expenses related to hidden water damage, outdated wiring, or structural issues.

For example, a Brooklyn brownstone renovation cited in The Wall Street Journal uncovered asbestos behind plaster walls, requiring an emergency $14,000 abatement. Other frequent surprises include termite infestations, mold, or outdated plumbing that isn’t up to current code.

These hidden issues can easily add 10–20% to the initial budget. Contractors often include contingency allowances, but in a competitive market, bids are kept low to secure jobs, leading to underestimation.

Homeowners are then forced to choose between cutting corners or paying up to keep projects on track.

Permitting Delays and Regulatory Shifts

Navigating local regulations and securing permits has become even more complicated in recent years. According to the 2024 National Association of Realtors Remodeling Impact Report, 42% of homeowners cited permitting delays as a major cause of budget overruns.

Increased demand for permits during the post-pandemic renovation boom overwhelmed many city offices, causing wait times to double in cities like Austin and Seattle. Further, new energy efficiency codes introduced in 2024 require additional inspections and upgrades, which were not factored into many pre-existing budgets.

For instance, in Los Angeles, new solar-ready requirements for remodels added an average of $6,500 to project costs, based on city data. When permits are delayed, contractors are forced to reschedule crews and reorder materials, both of which can hike costs dramatically.

Changes in Homeowner Preferences Mid-Project

Changing minds comes at a price. The 2024 Houzz & Home Renovation Trends Study found that 37% of homeowners requested significant changes to the original renovation plans after work began.

These change orders often involve upgrading materials, reconfiguring layouts, or adding new features, each of which drives up costs. For example, swapping out standard countertops for quartz can add $2,000 or more to a kitchen renovation.

Contractors must halt or redo work, order new materials, and sometimes bring in additional specialists, all of which add labor hours and fees. While some flexibility is necessary, frequent or last-minute changes are a leading cause of budget creep, often pushing final costs 20% higher than initial estimates.

Inaccurate Initial Estimates and Aggressive Bidding

Renovation budgets often start off on the wrong foot due to overly optimistic or intentionally low contractor bids. The Joint Center for Housing Studies at Harvard reported in their 2024 Remodeling Futures report that 28% of projects went over budget because of underestimated costs during bidding.

Contractors sometimes lowball estimates to win jobs, counting on change orders and “extras” to make up the difference. Homeowners, eager to save money, may choose the lowest bid without carefully reviewing the scope of work or asking for detailed line items.

This practice leads to misunderstandings about what is included, and when the true costs emerge, budgets quickly unravel. Financial planning software like RenoFi has seen a 19% increase in users requesting mid-project loans in 2024, highlighting the problem of underfunded renovations.

Inflation and Economic Uncertainty

Inflation remains stubbornly high in 2024, affecting every aspect of home renovation. The Bureau of Labor Statistics reported a 3.7% year-over-year increase in the Consumer Price Index as of April 2024, with construction-specific inflation trending even higher at 5.2%.

This means that by the time a renovation is under way, the cost of materials and labor may already have risen compared to when the budget was finalized. Many suppliers now include “price escalation” clauses, passing cost increases directly to the homeowner.

Economic uncertainty also impacts the availability of financing, with average home equity loan rates reaching 8.1% in early 2025, up from 6.5% the previous year. Homeowners are left scrambling to cover unexpected costs as their budgets are eroded by inflation.

Limited Access to Financing and Rising Interest Rates

Financing a renovation isn’t as easy as it used to be. In 2024, lenders tightened requirements for home equity lines of credit (HELOCs), and the average approval time lengthened to 45 days, according to Bankrate.

Rising interest rates have also pushed monthly payments higher, squeezing homeowners’ budgets. The Mortgage Bankers Association reported that HELOC originations dropped 13% year-over-year in early 2024, reflecting both higher costs and stricter lending standards.

When funds run short mid-project, homeowners are often forced to use high-interest credit cards or personal loans, increasing the final price tag dramatically. Projects that start with a tight budget, assuming easy access to credit, are especially vulnerable when financing becomes expensive or inaccessible.

Project Creep and Add-Ons

What starts as a simple bathroom remodel often snowballs into a full-blown overhaul. The phenomenon known as “project creep” is highlighted in a 2024 report by the Home Improvement Research Institute, which found that 29% of renovation projects expanded beyond their original scope.

Homeowners are tempted to add features like heated floors, smart home technology, or luxury finishes once work begins, reasoning that “as long as we’re at it…” Each add-on brings its own set of material and labor costs, and the cumulative effect can push a project thousands over budget. Contractors encourage upgrades to boost profit margins, and homeowners, already invested emotionally and financially, often agree.

The end result is a dazzling renovation—and a much larger bill than planned.

Lack of Experience and DIY Mistakes

In 2024, more homeowners are attempting DIY renovations, hoping to save money. However, a survey by Porch.com revealed that 47% of DIYers spent more than planned, with 21% requiring professional help to fix mistakes.

Common issues include improper installation of plumbing or electrical fixtures, mismeasured materials, and incomplete finishes that require costly corrections. The proliferation of “how-to” videos online can give a false sense of confidence, but when problems arise, the costs of hiring a pro to repair DIY errors often exceed the original savings.

Inexperienced homeowners may also underestimate the time commitment, leading to project delays and extended rental or storage costs. In the end, what seemed like a budget-friendly approach can become a pricey lesson in the value of expertise.