Since the start of the Covid-19 pandemic and the real estate market frenzy that quickly followed, one theme has been consistent: Buyers looking to move during this turbulent time have wanted turnkey properties they could hunker down in immediately.
“No one wants to do a renovation,” said Diane Ramirez, chief strategy officer for Berkshire Hathaway HomeServices New York Properties. “No one wanted to do it before [the pandemic], but now [with supply chain and labor shortages] there’s financial and timing issues, as well.”
However, two years of non-stop price increases have combined with rising mortgage rates and inflation to create a newfound sense of price sensitivity. Between the financial factors and an overall lack of quality inventory, some would-be buyers are wondering if the cost of a brand new home is truly worth it—and if, counterintuitively, taking on renovations might wind up being less of a headache.
“There are a lot more people now that are wanting to do their own project, or more or less being forced to do their own project because of market pressures,” said Frank Nolan, president of Vanguard Properties/Luxury Portfolio International in San Francisco.
For owners who might have once considered upsizing to a new home, adding value onto their existing home may now make more financial and logistical sense.
“Many homeowners currently have quite a bit of equity they could tap into to take on a remodeling project,” said Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors. “They may have a significantly lower interest rate, especially if they locked in a refinance [when rates were] in the 2% range, which some did.”
According to the 2022 Remodeling Impact Report released by NAR in April, hardwood floor refinishing, new wood flooring, insulation upgrades, and conversions of basements into living areas are the interior projects for which homeowners are most likely to recover costs or even increase their home’s future resale value.
“I have clients who are considering adding an [accessory dwelling unit] onto their lot rather than selling their current home,” said Dan Ortega of Sotheby’s International Realty—Los Feliz Brokerage. “Prices and competition being what they are, it may be a better option than jumping into the bidding wars for a larger home. Especially if the current prices for a larger home exceed the cost of the renovation.”
A prime location is another factor likely to make renovation a more appealing prospect than a resale. “I find that many clients will carry out a complete rebuild of their current home, rather than move, as it’s difficult to replace a location overlooking Sydney Harbour or one of the beaches here,” said Michael Pallier, an agent with Sotheby’s International Realty in Sydney, Australia.
Daunting though a renovation or construction project might be, below are some scenarios in which it might be a better bet than buying new.
Article Source: Mansion Global
