For Danny Johnson and his family, it’s important to stay in the place and home they love.
Johnson, who owns a cash-and-carry real estate business in Texas, owns a 100-plus-year-old historic home near downtown San Antonio with small closets. He, his partner and two children have had to create their own storage, putting clothes in plastic bags and tucking them under the beds.
Having more space would be an improvement, but there aren’t many homes for sale in the area, and Johnson knows firsthand how difficult it can be to find a place that has everything they’re looking for. So instead of investing the time and money it would take to buy another place, move and sell their home, the Johnsons are renovating. They added a master suite with a walk-in closet and an ensuite bathroom.
“If we find another house that we like in a place that we like, we will probably have a lot of expenses to buy a house and make changes,” he said. “Remodeling our current house allows us to put all that money into improvements.”
The Johnsons are not alone in their decision to stay and improve rather than buy. Faced with an unaffordable and short-term housing market, many Americans are choosing to hold off on buying a new home and instead renovate the one they already own.
In a survey released last week by Citizens Bank, 44% of homeowners said that renovating their existing home is a more sensible option than buying a new one. 71 percent actually plan to do a home improvement project within the next two years.
Fabien Thierry, head of home equity lending at Citizens Bank, says homeowners deciding between moving and renovating are not only faced with the full cost of buying – down payment, closing costs and monthly payments – but also the emotional weight and stress of moving. Only 13% of survey respondents said they think buying a home is “achievable” right now.
“Choosing home improvement over relocation to affordability, unlocks value [the] a home and the desire to improve,” said Thierry.
The shift to home improvement is understandable given today’s tough market conditions. Mortgage rates, apart from briefly dipping below 6% earlier this year, remain firmly in the mid-6% range – almost double the interest rate seen during the pandemic years. High prices don’t help, either. These higher interest rates mean that financing is more expensive than a few years ago, driving up monthly mortgage payments.
The median home price in March, the most recent month for which data is available, was $408,800. Prices are 50% higher on average today than during the crisis, and supply remains tight in many areas, leaving the market more expensive for many buyers on the move.
That’s true even in high-end markets.
Matt Brown, a luxury real estate consultant with William Raveis Real Estate in Naples, Florida, regularly advises clients on how to decide whether to fix or buy. In an area where properties for sale are few and far between and come at a premium, Brown says he’s seeing a growing number of homeowners choosing to stay and upgrade over buying.
One example is a Port Royal couple who bought a home in 2019 with a 3.2% interest rate on their mortgage. They came to him for help deciding between a $2.8 million renovation or a $12 million purchase. Brown did the math and found that buying a new home would involve a larger loan – about 7%.
“Even with their lower ability to pay, the difference in monthly payments was amazing,” Brown said.
To make matters worse, as the wife explains to Brown, buying doesn’t mean they will get a better house. They could simply get someone else’s opinion at a much higher interest rate. Spending a few million to renovate their home, on the other hand, allowed the couple to create their own vision and keep the place they love.
While the financial benefits of home remodeling versus buying is a primary consideration for many homeowners, it is not the only one. Location is also an important factor. And sometimes, the decision to remodel feels right.
For Erik Leland, a real estate agent in Lake Oswego, Oregon, the decision to renovate instead of buy a new home was both financial and emotional. He bought a house in 2018 with the idea that he would let it be happy for several years, then sold and traded. The thing he couldn’t count on, he says, is to love the community.
As a result, he plans to stay in the home and make improvements that will give it a new look and add value to the property if he decides to sell it in the future. Leland is planning a complete exterior redo, including installing Hardie board siding, black-framed windows, faux stone veneer and a new garage door.
For him, the choice between staying and leaving was easy.
“If you have equity, value to keep and a home in an area you love, remodeling beats buying,” Leland added.
