More homeowners are refinancing and remodeling their homes
Regardless of whether homeowners are considering selling their homes or staying put, one trend is abundantly clear - they’re renovating their homes in record numbers. With the proliferation of popular cable TV home improvement shows, the country has seemingly gone “renovation crazy”. As a result, more and more homeowners are taking advantage of low interest rates and refinancing to make significant improvements to their homes.
The numbers don’t lie - 2019 should be a knockout year for home renovations. According to a recent Trulia survey, over a third of all homeowners plan to remodel their homes in the next two years, and 20% of them plan on spending more than $10,000 to do so. Building on last year’s significant gains in remodeling spending, the National Association of Home Builders (NAHB) estimates that remodeling spending will increase another 5% in 2019. The increases should be even larger in the hotter real estate markets. For example, a recent Harvard study indicated that Dallas posted a whopping 11% increase in spending in 2018.
Housing experts point to an almost perfect storm of conditions in the housing market which is causing homeowners to renovate in large numbers. Property values are rising in most parts of the country and interest rates have dropped. As a result, national mortgage lenders like Nutter Home Loans in Kansas City, Missouri have noticed a significant uptick in cash-out refinancing.
The nation’s tight housing market inventory is also having a significant effect. For those homeowners who are getting ready to list their homes for sale, remodeling is perceived as a huge benefit. “Homes on the market that have an updated kitchen or a new master bathroom are much more marketable. The difference is huge,” according to Mary Villella a real estate agent with RE/MAX Beginnings KC in Lee’s Summit, Missouri. Conversely, for home buyers who have been frustrated by the lack of listings in their area, many of them are opting to sit tight and remodel instead.
Let’s also not underestimate the power of television to shape consumer attitudes. Fueled by younger demographics, home improvement TV shows have exploded in the past decade. Many of these popular shows feature extensive remodeling projects complete with expensive finishes and materials. As a result, 92% of younger homeowners are now planning to renovate their homes, the most of any demographic.
What’s really interesting is that only 17% of homeowners who are planning to remodel are doing so to sell their home. People are living in their homes for longer periods of time and more homeowners are living in older homes. According to the NAHB, 40% of houses are 48 years or older which obviously increases the need for people to remodel, if only to make repairs. In these situations, a cash-out refinance makes real financial sense because homeowners can get the cash they need and spread their costs out over a 30-year loan term and thus keep their monthly mortgage payment relatively low.
So if you’re like a lot of homeowners nowadays, now is a good time to consider a cash-out refinance in order to finance those home renovations you’ve been longing to make. New kitchen? You bet. Outdoor living area? Absolutely. Brand new master bathroom? Why not! According to all the experts, everyone seems to be doing it.
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