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Renovate or relocate? Priced out of perfect homes, homeowners are choosing to create them instead

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Renovate or move?The price of the perfect home is too high, so homeowners are choosing to create them instead

The pandemic has caused many to rethink what they want and need in their place and home.

In fact, nearly 40% of Americans are considering moving this year, and a third say the pandemic has completely changed what they want from a home. Investigation By Lending Tree.

If you don’t have the option to buy a new home and your home no longer meets your needs, you’ve probably considered renovating.

You can also remove walls to create a more open space. Maybe refinishing a basement isn’t as difficult as participating in the hectic housing market.

But if you’re weighing the options of buying a new home or embarking on a new renovation project, there are many things to consider.

Do not miss it

You’re not the only one thinking about renovating

The housing market is a confusing place right now. The number of vacant houses has finally increased, Prices are still up 10% than last year, according to Redfin.and interest rate risenot only is it difficult to climb the wealth ladder now, but it is also hard to try to move up.

“The perfect home in the perfect neighborhood,” said Eric Finnegan, vice president of research and demographics at John Burns Real Estate Consulting, which provides housing market analysis to clients such as builders, realtors and investors. is really hard to find,” he said.

“And since COVID, it’s been harder and harder. It’s probably going to be harder in the next three to five years, for a variety of reasons.”

Despite or because of the frenetic market, many people are pouring money into home remodeling.

Renovation activity and spending will hit a four-year high in 2021, according to the report. Houzz US Houzz & Home Study: Renovation TrendsMedian spending on renovations increased 20% to $18,000 as more than half of homeowners renovated last year.

According to the National Association of Realtors and the National Association of Renovators, Americans spent $420 billion on home renovations in 2020. 2022 Renovation Impact Report.

Millennials play a big role in that.

More Millennials Choosing to Renovate

One way millennials can get the home they want is to build one.

Typically, entry-level buyers will upgrade to larger homes after about five to seven years, says Finnegan.

But his research shows that many millennials choose to stay and renovate instead of moving. He calls it the “trade-up-in-place” phenomenon.

“It’s so hard to find a house right now that they’re saying, ‘Okay, we’re not really going to trade up. We’re going to stay where we are.’ I’m going to stay and upgrade everything.”

More fixes, more problems

But doing mods comes with its own set of problems.

About 1 in 10 homes are undergoing major renovations, Finnegan said, and as demand for supplies and labor rises, so do costs.

“Modifiers basically need to pay their workers more to keep them from being poached by modders across town, which is one of the drivers,” Finnegan said. increase.

Add to that supply chain disruptions, high demand for materials and, most recently, high gas and diesel costs.

“now [remodelers have] Booked for 2023. So they’re actually trying to focus on this part of the market where they can do remodeling projects right now. . ”

Contractor wait times are months and price quotes are constantly changing.

“Usually when a remodeler submits a quote, homeowners have bids from several different contractors, so they keep it open for maybe 30 to 45 days,” Finnegan said. increase. “The remodeler is shortening the estimate period because prices are rising.”

How much value will these projects bring to your home?

The upside is that a remodel can add a lot of value to your home. In particular, there are some projects that see large profits when sold.

Refinishing hardwood floors recovers about 150% of the cost according to the retrofit impact report, while adding new hardwood floors recovers almost 120% of the cost. Insulation can give you a 100% return on your investment.

“Sell that house and you’ll get back all the money you invest,” says Jessica Lautz, vice president of demographics and behavioral analytics at the National Association of Realtors.

At the lower end of the cost recovery spectrum, adding a new master bedroom has a 56% profit, adding a new bathroom has a 63% profit, and a kitchen upgrade has a 67% profit.

These returns may not materialize for years, but there’s also a joy factor to consider, says Lautz, depending on the time of sale. I am asking how much joy the change has brought to their home.

“Honestly, the joy scores were all a little higher in this year’s iteration of the report,” says Lautz. “I think people will be happy with this change and just happy to do things in their own homes that make them feel really good.”

Want to keep renovation costs low

There are several ways to keep the cost of retrofits relatively low, DIY playbook.

Finn and her husband converted a Chicago condo with no building experience. They remodeled the bathroom, adding built-ins and other customized touches.

“We sold within 24 hours and received five offers and an all-cash offer, and we went with it,” says Finn. “And then I did a lot of DIY and then just sold it and I made $100,000 because I didn’t see anything else like it on the market because it was all kind of builder basic. .”

Now they are in their second home in the Chicago area.

“It’s a great neighborhood, but it was probably the ugliest house on the street,” says Finn. “And that’s exactly what we were looking for…and we seem to see potential here.”

Most of the time, Finn and her husband do a lot of the work themselves, but hire people when they need it. For special jobs such as electrical or plumbing, hire them with the proper permits to ensure they are done correctly.

“But when it comes to things like cosmetic upgrades, tiling, and woodwork, we take those projects ourselves to save money,” she says. to get the satisfaction of being able to

make a budget

Finn says planning is the most important part of any project. The first thing she does is create a budget with a 10% to her 20% buffer in case things go wrong.

“People don’t talk numbers. It’s really helpful to actually know how much a kitchen remodel will cost.”

It also helps you understand where you are saving your money.

“For example, we did some built-ins.

She added that it was before lumber prices skyrocketed.

“We saved a lot of money by doing it ourselves.”

Do research and plan ahead

The internet these days is a treasure trove of information about DIY projects. Whether it’s Instagram, YouTube, or blogging, there’s very little you can’t learn.

“I’m a blogger, but I read other people’s blogs and I say, ‘Wow, that’s how they did that build. I’m going to put my own spin on it,'” says Finn. say.

She isn’t afraid to ask the experts either.

However, they have shared in the renovation struggles during this time as well. After delays with a kitchen remodel and waiting for cabinets to arrive, Finn says she booked a contractor months in advance to help with the bathroom reno.

For Finn and her family, a makeover was the right decision. She estimates that hundreds of thousands of dollars in value was added to the home during the renovation process, but that doesn’t include the “joy factor.”

“But we’ve also spent a lot of money,” she says. “You can’t expect to get all your dollars back, but if you can enjoy it, it makes a big difference.”

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This article is for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.

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