According to the National Association of Realtors, pending home sales are down 7.3 percent from last year. A trend that looks like it will continue at least until there’s a substantial wage increase across the board and the average borrower is able to obtain lines of credit easier. People in the market for a new home or those wanting to remodel should consider the following three factors before deciding on either option.
Local Market Conditions
Buying a home has two basic aspects; sell your existing home and getting the best deal possible on your new home. The difference is the market. Some markets are in pretty good shape that a home owner could sell and buy.
For example, owners in areas like Northern California and Portland, Oregon can sell quickly giving the owner enough cash for a down payment on a new home. It’s a matter of supply and demand in these areas. Even though the prices are high, there is very low inventory which means homes are in high demand.
Check with a local real estate agent to get details on both home prices and inventory in your area.
Counterproductive Upgrades
According to Steven Melman of the National Association of Home Builders, Americans spent $130 billion upgrading their homes in 2013. That’s up approximately 3.1 percent from 2012. Melman also stated that the average remodel cost $4,000 so far in 2014.
Obviously renovating your home is cheaper than buying a new home, but renovating has its own share of problems. The primary problem being finding the money to remodel. Many owners take out a home equity line of credit to finance renovations, but then that turns into another debt to be repaid.
If you are considering selling in the near future, you should only do renovations that will increase the value of your home. Things like smart home appliances, energy efficient windows and updated lighting are the most common renovations and provide a good return most of the time.
The best way to find out if a certain renovation is beneficial, consult the annual Cost vs. Value Report published by Remodeling magazine.
Future Market Conditions
The nonprofit urban leadership firm CEOs for Cities commissioned a study that showed homes closest to schools, parks and other amenities are worth more than homes that are farther away. It’s important that if you see construction near your home, to find out what is being built, certain amenities can raise the value of your home.
A good example of this would be Wal-Mart stores. Whatever your feelings are about Wal-Mart, a study done by the University of Chicago and Brigham Young University showed that in 2012 homes that were within a half mile of a new Wal-Mart increased in value by 3 percent.
Bottom line, it’s a personal choice whether to buy a new home or to remodel, but it is very, very important to do your due diligence researching the market and what will bring you the best value for your home…or new home.
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