As mortgage rates have climbed and talk of economic downturn ramps up, homeowners who waited to sell might now find themselves in a quandary as the scorching hot real estate market finally starts to cool.
Mischa Fisher, Chief Economist at home services company Angi, says that all-time high property prices have made many homeowners decide to stay put and renovate instead of buy a new home. But is spending money on home improvements a wise move right now, especially with rising costs due to inflation and a still-burdened supply chain?
— Is it a good time to renovate?
— Which renovations add value without breaking the bank?
— Smaller upgrades can have big appeal.
— Home improvement in a tough economy.
— The decision to DIY
— Work with a real estate agent to learn what buyers want.
Is It a Good Time to Renovate?
The simple answer is yes, though the nature of the projects should depend on whether you plan to stay in your home for years or are looking to sell soon, according to Fisher.
“Ultimately, homeowners should focus on making their homes work for their current needs, but it doesn’t hurt to pick projects that add value,” Fisher says.
[READ: How to Renovate a House.]
Which Renovations Add Value Without Breaking the Bank?
While kitchen and bathroom remodels are typically high on the list in terms of added value, there are other smaller projects with a big payoff. Remodeling Magazine’s 2022 Cost vs. Value Report, which lists the projects with the best return on investment, or ROI, once again has garage door replacement on top of the list. With an average national cost of just over $4,000, homeowners can reap a 93% ROI. A new steel entry door at around $2,200 can result in a 64% ROI.
“Today’s buyers have more choices with listings staying on the market for a longer period of time,” says Kimberly Jay, real estate broker at Compass in New York. This isn’t to say that the market has already flipped from a seller’s market to a buyer’s market, but it does mean that sellers will need to spruce up their homes if they want to sell as quickly as their neighbors might have just months ago.
Fisher says boosting curb appeal is one way of adding value to your home without breaking the bank. He suggests painting the front door a new color, adding new plants or replacing the porch light as quick ways to refresh your home’s exterior.
Jay also has suggestions for what sellers can do to woo more potential buyers without spending too much money:
— Repaint walls in white to show the buyers a blank canvas.
— Remove any mirrors on walls that seem dated.
— Paint dark kitchen cabinets white or a lighter color.
— Remove all carpeting and refinish floors.
— Update door knobs and kitchen cabinet pulls.
— Replace bathroom fixtures.
— Fix or update all lighting.
— Remove outdated window treatments and wash all windows.
— Regrout bathrooms and update old vanities.
For kitchens that need a makeover, Jay suggests changing kitchen countertops to marble or porcelain and installing new appliances if a full renovation is not doable for you right now.
[See: 15 Secrets to Selling Your Home Faster.]
Smaller Upgrades Can Have Big Appeal
Fisher also touts the benefits of smaller upgrades to a kitchen. Replacing cabinet hardware, installing a kitchen island, or adding a new backsplash “can instantly add value and make your kitchen feel new,” he says.
Partial upgrades also are a good move for bathrooms. While the return on investment for a full bath remodel is 72.7% nationally, per Angi data, smaller fixes like a new vanity or bathroom hardware give buyers the freshened-up look they want without putting sellers in a budget crunch.
“If you think you might move eventually, you can usually find a compromise between what you want and what will give you the biggest ROI,” Fisher says.
Home Improvement in a Tough Economy
Keith Liston, president of Liston Design Build, has been remodeling homes in St. Charles County and St. Louis, Missouri, since 1984. “We’ve certainly seen the ups and downs in the economy, but our experience is the remodeling activity doesn’t really slow down,” Liston says. “People just make smarter decisions and don’t go too lavishly with some of their choices.”
In this way, remodeling is a recession-resistant industry because the jobs are still coming in, though they might be smaller. However, Liston says homeowners are paying more for everything. The normal cost of living increase for materials is about 5% every year, but Liston has seen almost a 20% increase each year recently for cabinets, appliances and flooring. Fuel surcharges have been added to most purchases, he says. He notes that the prices for raw goods like lumber are volatile, but they have mainly been on the upswing during the pandemic.
It’s worth noting that while some tasks might seem too labor-intensive if you’re getting ready to sell a home, it could be worth it at resale. For example, according to the 2022 Remodeling Impact Report from the National Association of Realtors, homeowners might expect a whopping 147% cost recovery from refinishing floors and 118% from installing new wood flooring.
“As long as homes are holding their value, it usually gives people comfort that they should invest in the house,” Liston says.
[Read: The Guide to Selling Your Home]
The Decision to DIY
If you’re wondering whether now is the time to put to use all those skills you’ve learned from watching home improvement shows, you’re in good company: According to the recent “The State of Remodeling in the U.S.” report from House Method, an online resource for home improvement and maintenance, 60% of homeowners have become DIYers.
It’s apparently a good decision for most, as 57% of homeowners saw their home’s appraisal value increase by over $7,500.
While 93% of homeowners reported a better quality of life after their home projects were completed, it turns out staying within a budget is the hardest task of all. The report noted that 9% of homeowners exceeded their renovation budget by $1,000 while 38% of homeowners went over by $5,000, Alarmingly, 19% overshot it by more than $10,000.
Liston says that if you’re concerned about spending money right now, you don’t have to necessarily postpone a project. The good thing about home improvements is that there are usually “good, better and best” options for finishes, appliances and other renovation elements. Choosing a “better” instead of the “best” option, for example, is a way to scale back, he says.
Work With an Real Estate Agent to Learn What Buyers Want
With homes in some areas still flying off the market in mere days, it’s tempting to forgo a real estate agent and try to sell your property on your own. But cutting out the middle person cuts you off from insider info on what buyers want.
“Speak to a (real estate) broker who understands the mindset of buyers and get their advice on what the must-dos are,” says Jane Katz, a real estate agent with Coldwell Banker Warburg in New York City.
While kitchens and bathrooms are typically a hit with buyers all across the country, real estate agents have their fingers on the pulse of what’s working for buyers in your immediate area.
Rich Kwok of Century 21 Real Estate Alliance in San Jose, California, says that in his area, home offices or study areas, accessory dwelling units such as garage apartments and in-law suites, drought-tolerant landscaping and solar power systems are among the top home improvements and additions to consider making for better resale value.
Above all, Katz recommends that sellers should be focused on restoring the space to neutral to attract home buyers with a blank slate.
“Anything quirky or out of the ordinary that was done to (the space) should be undone,” she says, noting any outdated or overly custom design elements will be a turn-off to buyers. She says that agents and brokers might also be able to recommend a contractor to fix or improve the major issues at hand. But it might not even have to be that complicated, she says.
“Sometimes, something as simple as decluttering, a fresh coat of white paint, and clean windows can go a long way — and may be all you need,” Katz says.
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What Home Renovations Should You Make In a Recession? originally appeared on usnews.com
Correction 08/16/22: A previous version of this story misspelled the name of Mischa Fisher.
Correction 08/17/22: A previous version of this story misstated the location of Rich Kwok’s real estate agency. He is with Century 21 Alliance in San Jose, California.
