Many homeowners put off by high mortgage rates and home prices opted to renovate their spaces rather than move, even if it meant spending more than they planned, a recent study by House Method said.
The study surveyed 1,000 homeowners and said that 93% of them found renovations to be worth the time, money and any temporary discomfort that was caused.
The number one reason homeowners said they decided to renovate was to enjoy their living spaces more, and more than 75% said they intended to stay in their homes after the project’s completion. Roughly three quarters (76%) of respondents also said they planned on tackling another home renovation, whether in their current home or a new one in the future.
House Method’s study also said that 32% of homeowners planned to spend $5,000-$10,000 for their renovation project. However, nearly 80% reported spending more than their original budget, with 68% going over by $5,000 or more.
The most-costly factors during the renovation process were materials and timeline delays.
“Although homeowners face challenges when renovating, they have not been deterred from the renovation process,” House Method said.
If you are considering a home renovation, a cash-out refinance could help you fund the project. You can visit Credible to compare multiple mortgage lenders and find your personalized interest rate without affecting your credit score.
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Homeowners see increased home equity
With high home prices, homeowners could look to capitalize on their assets’ increased value to finance home renovations.
CoreLogic’s latest Homeowner Equity Insights report showed that homeowners with mortgages saw their equity increase by 27.8% year over year in the second quarter of 2022. That translated into a collective gain of $3.6 trillion for an average of $60,200 per borrower.
Shmuel Shayowitz, president and chief lending officer at Approved Funding, said that homeowners could still look to the equity built into their homes over the past few years as one option for funding home renovations.
“Obtaining a home equity line of credit or a fixed-rate second mortgage could be a very affordable way to finance your renovations,” Shayowitz said. “Alternatively, construction loans are available and could be comparable to prevailing mortgage rates and programs.”
If you’re interested in getting a cash-out refinance, you can visit Credible to compare multiple mortgage lenders at once and choose the one with the best rate for you.
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Expert says renovation could help sellers standout
Sellers in the market are currently contending with less enthusiastic buyers, sidelined by high mortgage rates that are more than 6% and expensive home prices. High inflation has forced potential buyers to pull back on spending as well.
Roughly one of every 36 pending home sales fell through in the last week of August, compared to about one in every 50 at the beginning of the year, and one out of every 45 at the end of last August, according to Zillow.
Economists also anticipate that with buyers pumping the breaks, home prices will begin to see a meaningful cool down. CoreLogic predicted that home price growth will slow to 3.8% year-over-year by July 2023. And Black Knight’s data showed that the median home price growth in July fell 0.77% from June – the most significant single-month decline since January 2011.
“Annual home price appreciation still came in at over 14%, but in a market characterized by as much volatility and rapid change as today’s, such backward-looking metrics can be misleading as they can mask more current, pressing realities,” Black Knight Data & Analytics President Ben Graboske, said.
In this cooling housing market, renovations could help sellers stand out to prospective buyers, according to one real estate expert.
“The first impression of your home is absolutely key to making sure it shines in a cooling market,” Christine Morgan, a HomeLight real estate agent in Costa Mesa, Ca. said. “Anything that hit the market during the pandemic sold in a heartbeat. Buyers have more options now and are ultra critical with how they offer.”
If you want to learn more about drawing equity out of your home, contact Credible to speak to a home loan expert and get all of your questions answered.
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