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Why Renovating Might Be More Popular Than Moving Again

Why Renovating Might Be More Popular Than Moving Again

After a surge in interest in house purchases, remodeling your current residence rather than looking for a new one is becoming more and more popular. This is why.

Nearly all homeowners encounter a time where they must choose between seeking for a new place to live and just patching up the one they already have as their lives and families develop and change. A recent poll by Discover Home Loans indicated that 79% of homeowners now prefer to remodel than buy a new residence, following a strong—and very brief—shift favoring moving over upgrading.

According to Rob Cook, vice president of marketing at Discover Home Loans, “the shock of seeing interest rates rise is impacting homeowners’ thinking in terms of cost to finance their projects.”

Is it wiser to relocate or remodel right now, especially with the changing economic climate? We questioned a few industry professionals about how this decision is still being impacted by market forecasts and growing building supply prices. Continue reading for their opinions and suggestions on how to choose which is best for you.

Waning Home-Buying Interest

Dan Demian, a CFA candidate and senior financial advising specialist at personal finance app Albert, advises taking a 10-year view in order to completely comprehend the present market. According to him, mortgage rates increased in the years before to 2020 before abruptly falling to a 10-year low in January 2021. Since then, they have risen once again, reaching the highest rate since 2009 in May 2022, according to Demian.

According to Cook, this increase is hurting the monthly payment that purchasers can afford as well as whether or not they would even be accepted for a loan.

Why Renovating Is a Good Option

With these changes, it’s simple to see that a new house isn’t necessarily a better deal or where the grass is greener. When 1,531 homeowners from across the U.S. participated in Discover’s survey, 79% of respondents said they were choosing to improve the home they already owned instead of buying one. Given that 78% of respondents also saw home remodeling as an investment, according to Cook, it makes sense that there would be a similar interest in enhancing that investment.

Despite having different justifications, 27% of respondents thought remodeling was a better method to customize their home than buying a new one, and 26% said it was less expensive. Additionally, respondents mentioned that finishing a refurbishment would give them a sense of accomplishment. Approximately 9% of respondents claimed that the present housing market offered few possibilities and 7% claimed that it was too stressful to look for a new house.

The majority of the normal maintenance would be the focus of 42% of the Americans planning to refurbish, while 31% intended to replace their appliances. Others had more ambitious plans; 31% planned to refinish flooring, 29% to rebuild bathrooms, and 28% to rework kitchens.

The same poll indicates that younger homeowners are more eager to take on improvements.

“There’s a really strong, pronounced generational shift,” claims Cook. Millennials are extremely interested in redecorating, with 77% planning to do so in the upcoming year.

If you do decide to renovate, use caution in your choice of project financing. Cook reminds out that refinancing a house loan is a terrible idea due to rising interest rates, but home equity loans may allow you to access some cash without raising your interest rates.

Homeowners are advised by Amy Richardson, CFP of Schwab Intelligent Portfolios Premium, not to use their retirement funds for such improvements.

It’s preferable to think of that money as being off-limits, she advises. For bigger needs, a home equity line of credit (HELOC) could be a viable choice. HELOCs typically have low interest rates, and you only pay for what you actually borrow.

Should You Move or Renovate?

Doing the arithmetic, according to Cook, is the secret to choosing. Customers may use mortgage calculators from Discover Home Loans and comparable sites to determine how much house they can afford by entering information about their income, down payment, and current loan interest rates.

Similar to this, you should seek current prices for such jobs if you’re thinking about doing a significant makeover. According to a Discover Home Loans survey, 64% of homeowners who received renovation quotes claimed that the final cost increased once the project was finished, primarily because of rising supply costs (as we’ve seen with lumber prices), and 48% claimed that their project was delayed due to a lack of materials.

Richardson makes the point that costs can readily alter, even if you’ve determined a refurbishment is less expensive than a new house.

“Be realistic about the fact that renovation projects frequently go over budget,” she advises. Think about including an extra 20% or more into your budget for project overruns.

After comparing the pros and cons of remodeling vs purchasing, consider the market as well. In order to get their opinion on how remodeling your kitchen or bathroom can effect your home’s resale value, Demian advises speaking with local real estate agents. If you decide to buy now instead of later, those same sources can provide you with further information about what to anticipate.

Renovations frequently appear beneficial to us but may not considerably increase the value of your home, particularly in a buyer’s market, according to Demian.

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