What is the market telling us about renovating versus buying a new home during an uncertain real estate market?
The housing market entered 2019 under a cloud of uncertainty. Things weren’t bad, but according to Forbes, the real estate market is behaving like a C student – in other words, it’s not living up to its full potential.
Economists surmise that people generally are reluctant to engage in major purchases because of uncertainty. Mortgage interest rates may have continued to fall, but consumers are still struggling to come up with the down payment. Plus, consumer confidence continues to decrease because of concerns about the consequences of trade wars. Homeowners are asking a valid question: “Should I just stay put and renovate?”
No place like home
One of the top reasons why people choose to renovate instead of buying another home is because they generally are happy where they are. It’s what the “Zillow Group Report on Consumer Housing Trends” found. Of those homeowners surveyed, 63 percent said they have no plans to sell their homes. The report concludes that the decision to renovate an existing home instead of buying a new one is a reason why home sales continue to fall. Low inventory means there’s less to choose from, which is all the more reason to renovate and improve the home you already own.
A demographic shift among homeowners
Home is where the heart is, and a Harvard study says many more of us will choose to remodel instead of move. While economics pay a part, it’s also because of an unprecedented demographic change on the horizon. According to the U.S. Census Bureau, by 2035 people over the age of 65 will outnumber people under the age of 18 for the first time in the country’s history.
According to a USA Today survey, 43 percent of those approaching retirement age plan to remain in their current residence. Their homes will need renovations to accommodate the needs of older individuals.
The home improvement industry is already seeing the results of this demographic shift. The market grew 5.3 percent in 2018 and is projected to see sales surpassing $464 billion in the U.S. by 2022. Zillow reports that 87 percent of us over the age of 55 would prefer to spend money on renovation instead of buying another home.
The benefits of renovating a home
Nobody needs a statistic to know that moving is stressful. Even if you exclude the costs, there are still those related to selling a home and buying another. Real estate fees generally hover around 6 percent. This can easily surpass the budget of a modest home-renovation project.
Renovating is generally less expensive than buying those upgrades in a different home. Many renovations also provide a positive return on investment in the event that you do decide to sell your home in the future. Even a minor kitchen renovation, for example, can yield up to an 80 percent return on investment. Meanwhile, you get to enjoy the upgrade right away.
Building a custom home is often out of the range of affordability for most people. Renovating your existing home to accommodate your needs is a more practical approach. It also allows for renovations that can help you prepare to age in place or create opportunities for multigenerational family living.
More than 64 million Americans already live in multigenerational households, and it’s a trend that will continue to grow. Many traditional home layouts don’t match the needs for this type of living, and renovations allow for practical changes such as main-floor bedrooms, open living spaces, privacy nooks, and separate entrances.
Some renovation projects will pay for themselves. Projects that increase your home’s energy efficiency can even help you save money. Replacing old windows and doors may even offer tax incentives. New kitchen appliances can offer efficiency and convenience, and even help you stick to healthy lifestyle changes that include preparing food at home and eating out less.
Renovation isn’t always about aesthetics. According to HGTV, renovating for the sake of home maintenance has a better return on investment than, say, granite kitchen countertops or a new walk-in shower in the master bathroom. If you’re planning on staying put, the home-improvement cable channel advises, spend your money on renovations that keep your home sound.
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