Is Your Next Real Estate Move a Relocation or a Remodel?
Are you torn between renovating your existing home or moving to a new house? You’re not alone! As you can see from the stats below, this question is on a lot of people’s mind today. (Even more than whether they’ll renew Squid Game for a second season.)
Thanks, Netflix. I will never look at red lights and green lights the same.
If you’re currently caught in this conundrum, here’s some insight to help you make your decision:
What People Want in a House Now
After the last year and a half, people have developed new requirements and priorities for properties. This is equally true for first-time home buyers and those already in homes.
A home design trends survey from the American Institute of Architects found the following results for the third quarter of 2021:
- 70 percent want more outdoor living space
- 69 percent want one home office
- 48 percent want multiple offices or meeting spaces
- 42 percent want an in-law or au pair suite
- 39 percent want an exercise or yoga space
People want this.
Move or Remodel? What Factors Affect the Decision?
If you’re one of the people who has these new requirements in a home, your decision either to remodel or to move will come down to several factors:
- Desire to Relocate
With virtual jobs changing the working landscape, many people are suddenly finding themselves untethered to any one city for work. This ability to live and to work from anywhere has many potential home buyers looking in markets they didn’t previously consider.
If you’re looking to change cities (or even states) anyway, a move rather than a remodel makes good sense.
If, on the other hand, you love everything about your property and where you are, it could be worth remodeling your home rather than relocating.
- Financial Considerations
You’ll have to do the math for your situation and determine what makes the most financial sense. Should you invest in improving your current home, or should you dedicate those funds to the purchase of a new property?
With the return on remodel investment falling, you’ll also need to consider the financial give-and-take of home appreciation (in a new home) versus the expenditure of a remodel.
Of course, you could always save money by doing the remodel yourself…
- Feasibility of the Remodel
Some homes lend themselves to remodeling more than others. If you’re considering a renovation, you’ll need to assess your current home. Determine how likely it is you can make the changes you want given your home’s current layout.
If, for example, you’re looking for several extra rooms, your current home might not have the square footage to make that happen. If you’re on a septic, adding bedrooms could even mean additional expense, such as replacing or upgrading your system. Think through all these kinds of logistical and financial challenges.
If your house simply won’t accommodate your remodel needs, it might be time to start looking for a new home purchase that has everything on your wishlist.
Financing the Changes
Whether you’re bound for a remodel or a relocation, it’s going to mean expense. You’ll either need to fund the construction work or the costs associated with moving.
What’s the good news? You might already have that money available in the form of home equity.
Home equity saw unprecedented gains over the last two years. These record-setting increases mean homeowners might have more equity in their homes than they even realize. (Equity can be understood as the net difference between what your home is worth and what you still owe on it.)
For a more detailed breakdown of home appreciation over the last year and a half, as well as predictions for 2022, read here.
According to Odeta Kushi, First American deputy chief economist, recent increases in homeowner equity have been dramatic.
“Remember U.S. households own nearly $35 trillion in owner-occupied real estate, just over $11 trillion in debt, and the remaining ~$24 trillion in equity. In inflation adjusted terms, homeowners in Q2 had an average of $280,000 in equity—a historic high.”
Does that information make you want to sing?
Tapping into your equity could make either a remodel or a move feasible. If you’re looking to renovate, you can either refinance or take out an equity loan to capitalize on your cash. If you’re looking to move, you can translate your profits into the down payment and closing costs for a new purchase.
Don’t Wait Too Long
Experts are predicting mortgage rates will rise through 2022. Whether packing up the moving boxes or swinging the sledgehammer, you’ll want to decide quickly.
Locking into a mortgage interest rate at these historic lows can mean affording more home than ever before. (Learn why now is the perfect time to upgrade to a bigger house.) With a refinance, you can also lock in these favorable rates before they’re gone.
Get All the Info
To make the best possible decision, you’ll need all the relevant information. That means knowing exactly how much equity you have in your home (aka, how much money you have at your disposal). For that, you’ll need two things: your current mortgage balance and the most updated value of your home.
Your remaining mortgage balance can easily be found in your lender’s account portal or on a monthly mortgage statement.
To get the value of your home, you can pay for an appraisal. Here are the average costs in several markets:
- Virginia: Between $300 and $365
- Maryland: Between $295 and $380
- Washington, DC: Between $322 and $511
Your other option is reaching out to a local real estate agent. Based on his or her local knowledge of the market, that Realtor can give you a free assessment of your home’s value. You’ll never know for sure what people are willing to pay until the home is actually on the market, but a knowledgeable, experienced Realtor should be able to give you an accurate ballpark.
You and your local real estate professional.
Have questions? Ready to see how much equity you have in your home? Want to start looking for new properties? Contact us today, and you’ll discover real estate as it should be!
