60% of Home Shoppers are Willing to Renovate
A recently released study from Move.com showed 60% of home shoppers are willing to consider a home renovation project after they purchase their home. Whether it’s the HGTV effect, or limited homes for sale, more than half of survey respondents are willing to spend in excess of $20,000 on home renovation and 28% are willing to spend between $10,000 and $20,000. Additionally, 95% of respondents expect a return on their renovation investment.
With “fixer-upper” shows growing more and more popular, many home buyers and homeowners may misunderstand what goes into a home renovation project. Not all renovation projects are created equally. Functional renovation projects tend to have a greater return on investment than stylistic choices. According to Remodeling Magazine, the top six most valuable home renovation projects are garage door replacement, manufactured stone veneer, minor kitchen remodel, deck addition (wood), siding replacement, and entry door replacement (steel). From the Move.com report, “whether it is seeing the project unfold in a tidy 30-minute segment, or just getting inspired by the before-and-after shots, home shoppers are turning to home renovations to make their dream home when finding one as-is turns out to be difficult.”
95% of survey respondents expected to make money back from their renovation investment, with one-fourth expected an ROI exceeding 50%. However, such substantial returns may be an overestimate. National Association of Home Builders (NAHB) chief economist, Robert Dietz commented on misleading fixer-upper television shows, “when they show homeowners putting in $50,000 and then the value of their property jumps by $75,000 – sometimes what you are seeing is [not] the true reflection of the labor expenses. The budgets on remodeling sometimes just include material costs, and often they get a deal on that.”
Some home buyers expect to need to renovate their home after purchase because of today’s competitive market. With limited available homes for sale, home buyers may not be able to find a home that fits all of their needs and wants. Baby Boomers are occupying their homes longer, limiting move-up options for Gen Xers, and starter homes for Millennials. Home shoppers who are struggling to find the perfect home, may choose a home they will need to renovate, rather than continue their home search. The survey found shoppers who were most willing to take on a renovation project had previously owned a home. 65% of respondents between the ages of 33 and 54 were willing to renovate, compared with 59% of buyers under the age of 35 and less than one-third of buyers over the age of 55.
It’s no secret home renovations are becoming more common, and in some cases more necessary. In 2018, home renovation spending reached an all-time high. American homeowners spent $336.9 billion on remodeling projects, up 7.4% from the previous year. Getting a good return on your investment depends on how you finance that renovation.
If you have any questions about financing a renovation project on your existing home, or a home you recently purchased, please let me know.
Sources: Bankrate, HousingWire