Buy a New House or Remodel?
Posted in Home Remodel on June 5, 2019
Should I buy a new house or remodel the one I already have?
It’s a question that touches on every aspect of home ownership, from money and taxes to our emotional bonds to a place and how we feel about our neighbors.
Unfortunately, it’s the kind of question that can feel overwhelming and make you want to hide in one of the rooms of your current home. But as with any tough decision, a little knowledge can help you make the right choice.
Here are a few things to think about when deciding between a home remodel and a move. Hopefully, understanding the question a little better takes the pressure off.
The Current Home Buying Market
Any discussion of whether or not to buy a home has to take the current state of the market into consideration.
Demand in San Diego remains high and is predicted to stay that way. Home prices are steadily increasing, having stabilized following massive increases over the past few years. Exploring the numbers behind these trends is beyond the scope of this article, but there are a couple of key points that impact the remodeling question.
San Diego has inventory issues. Construction has stalled, according to a recent report, and fails to keep up with the demand for new housing. In some parts of the city, development is limited geographically by bays and canyons. Our famous downtown airport restricts the height of nearby buildings.
On top of these local inventory issues, a 2018 Zillow report found that 76% of Americans would rather remodel than move. Their preference contributes to a nationwide inventory shortage as people hang on to their homes.
Houses in San Diego sell fast. Your odds of selling quickly are good in San Diego’s healthy market.
Location, Location, Location
You can’t move your school district. You can’t move your neighbors. You can’t move your commute. If you love your neighborhood and the people in it, why would you give that up over a structure that can be totally redesigned?
On the other hand, if you’re unhappy with where you live or don’t see yourself staying there long term, no countertop or skylight or kitchen island is going to change that.
Location is about more than logistics and price ranges. Your emotional attachment to a place is a key factor you shouldn’t ignore. San Diegans who pay a premium to live near the beach know this better than anyone.
Do you love where you live? If the answer is a clear “yes” or “no,” you can stop reading now because that’s all you need to know.
If you do decide to stay put and remodel or remodel to sell, your location will have an impact on the scope of your project–more on that in a second.
Move? We just got here….
If you recently bought a new house, moving again probably doesn’t sound too appealing and won’t make much financial sense either. It can take at least three years before you can expect to break even selling a home you just bought. The average San Diegan buys a new house every seven years.
If you just moved in, you might not want to remodel right away either. Houses have a break-in period. It takes a little while to get a feel for a place and separate the little quirks from the deal-breakers. The more time you spend in a room, the more you’ll know exactly what you’d like to change about it. Take your time.
If you are going to remodel, try to find the best time to do it so you can keep the disruption to a minimum. You can avoid a lot of hidden costs and headaches by scheduling major work at a time when you plan to be out of town anyway.
When real estate agents talk about a “motivated seller,” they’re usually referring to something going on in the seller’s life that’s pushing them to close as quickly as possible.
What do you have going on that could motivate your decision? Why do you want to change your living space?
Maybe the school district didn’t matter when you bought your current place, but now you’re thinking about starting a family. Maybe you moved where you are now for the schools, but your kids are about to graduate. If you’re not overly attached to the room where you watched them take their first steps, you might think about moving somewhere with lower property taxes, rather than downsizing, when they leave home.
Know the reasons behind your decision, and you’ll be happier with the choice you make.
Remodeling costs are linked to the overall state of the economy. An upswing can drive up prices as well as demand since people have the money to spend on remodeling. A downturn can mean deals on materials and labor.
As recent history has shown us, the American housing market is so closely tied to our economy that’s more like the economy depends on the housing market, not the other way around.
Understanding how these factors are related can help you make smart decisions and get the most value for your money, whether you move or stay where you are.
Obviously, moving and remodeling both involve spending serious cash, but your return on investment (ROI) can vary substantially.
Your budget will determine the scope of a remodeling project or your price range for new a home.
Your possible ROI is another major consideration. If you want to sell your house, now or sometime in the near future, then you’ll want to plan any renovation or improvements with likely returns in mind.
Check out our post on remodeling ROI to learn more. Your remodel will likely be a compromise between what will give you the most enjoyment and what will boost your home’s value.
For example, if you put $87,000 into your kitchen, don’t expect those improvements to add anything like $87K to your home’s value. On the other hand, simple improvements like garage doors or a modest kitchen upgrade can pay for themselves and improve curb appeal immensely.
Moving can increase your property taxes, but so can any renovation that adds to your home’s value, especially when it involves adding square footage.
Your Home’s Current Condition
Whether or not the alternative is moving, every remodeling project should begin with an assessment of your house’s current structural condition. That new bathroom might have to wait if your roof or foundation needs repair.
This is an even more pressing issue when the time comes to sell and your house faces inspection.
Your home may be your castle, but it’s not an island. The value of your house is related to the value of the other houses in your neighborhood. This matters when you’re thinking about remodeling. As a rule, you want to keep your house within the average price range in your neighborhood.
Over-improvement is what happens when your remodeling project adds too much value to your home and makes it hard to sell. People in the market for a $700,000 house usually aren’t looking for one in a $400,000 neighborhood.
Your improvements and upgrades can only add as much to the price as people are willing to pay for them. The more you miss the mark on this point, the less you’ll recoup when you sell.
Instead of a high-end remodeling bonanza that makes your house stand out in the wrong way, do your research and plan sensible improvements with value in mind.
If you have your heart set on major high-end changes that would be completely out of place in your neighborhood, maybe moving to a house where those features are standard is the answer.
Remodeling to Sell
Even if you decide to move, you may end up remodeling anyway to fix any issues or make the house more attractive to buyers.
While some improvements might be necessary, it’s hard to get excited about spending money on upgrades you won’t be the one to enjoy.
Focus on finding that ROI sweet spot, or, if you’re not in a rush, make the changes that would encourage you to stay put for a little while and revisit the moving question some other time.
Call today for your free consultation.