You can’t stand your kitchen floor plan and cramped bathrooms. Many clients ready for a housing upgrade face the same question. Given the current housing market, should I remodel or move? The surrounding market heavily influences the answer. Is the U.S. headed for another housing inflation storm? Will the price of lumber continue to plague your remodeling plans?
If you have questions and anxiety about your prospects as a homeowner, you’re not alone. The housing market is the source of much speculation and heartache for professionals and homeowners alike. While we don’t have a crystal ball, we can see the writing on the wall. The current market conditions have created a unique climate that incentivizes remodeling over moving to spend your daily life surrounded by your dream features. Many potential clients are surprised to hear about the advantages of remodeling vs. moving in the 2024 housing market.
Peacock & Company partners with our South Bend, Indiana neighbors to reimagine their outdated spaces and create beautiful home remodels. Our decades of experience have given us insight into many market factors that impact remodeling a home in our area. Consistency and time-tested processes keep us busy in all economic climates. However, we understand that information is powerful. Knowing what to expect from a remodel puts many homeowners at ease and equips them to plan for their unique circumstances.
Most people move to add space and amenities their current home does not offer. Remodeling is a better idea than moving in a housing market where your mortgage payment won’t go as far. For example, if you currently have a 400K home and put 20% down at a 4% interest rate, your mortgage payment is roughly $1,800/month. If you have the same budget today, you can afford much less house. A $280K home with 20 down and a 7.2% interest rate is also a monthly payment of $1,800.
A remodel or home addition can add value and space to your home at a lower interest rate than a move rate, while mortgage rates are high. High mortgage rates make moving to a new home cost-prohibitive and incentivize remodeling.
When mortgage rates are low, many homeowners pay for their remodels with a cash-out refinancing, but this locks in the current interest rate. Cash-Out refinancing is a more expensive option when interest rates are high. Luckily, there are plenty of ways to finance a remodel at a lower interest rate than current mortgage rates.
The most popular home improvement loan option is a home-equity line of credit (HELOC), which leaves your mortgage rate untouched and may charge slightly less interest than current residential mortgages. If you need a loan to finance a home improvement, we currently recommend home equity loans for remodeling in Indiana.
The U.S is not in a recession yet, but there is a great deal of speculation that we may soon enter an economic recession. If you are confident about your financing, remodeling during a recession will increase your purchasing power. Goods and services in falling demand see price reductions. If you’re able to ride out the recession before selling or plan to stay in your home for the foreseeable future, remodeling during a recession can put you ahead as the market recovers.
The ROI on your newly remodeled home will depend on the projects you completed and the materials you choose. If the market is hot and home prices are increasing more quickly than other goods, your ROI might be higher as your home accrues more value than the cost of your remodel. If you are hoping to extract maximum resale value from your remodel, we suggest classic and universal design choices so that time doesn’t date your design choices and affect your ROI.
Construction costs were notoriously elevated during the pandemic due to both supply chain concerns and increased residential construction demand. Overall construction costs have risen about 35 percent since 2020. Construction costs will go down when supply chain issues ease. Experts disagree about when this might occur but speculate that the cost of lumber and other building materials will begin to decline at the end of 2023 and into 2024. This puts your construction in the sweet spot if you begin now. If you wait to renovate your house, you risk further market volatility and supply chain squeezes.
Peacock and Company is a premium home remodel designer and builder near South Bend, Indiana. Our skill and meticulous eye for detail offer beautiful home remodels to suit any taste. We would love to hear more about your project. Let’s transform your current space into your dream space.