Thanks to the pandemic, our lives have changed in the last couple of years. How and where we work, shop, and live in our homes have been centers of significant change and re-evaluation. Whether you're considering selling your home or just looking to improve your quality of life, it's more important to know what upgrades have the best return on investment and adds value to your home.
For example, a dedicated home office and outdoor entertainment and living spaces are coveted by buyers in a house for sale. This blog post will look at trending home improvements that can add value to a house for sale in 2022.
We used surveys from real estate agents, expert data from the National Association of Home Builders (NAHB), and other industry experts to determine what home buyers are looking for in a house for sale in 2022.
Researchers estimate that total spending on remodeling projects in the U.S. could reach $430 billion by the second half of 2022. Growth is expected to taper in the third quarter due to rising costs of materials, labor, construction, and interest rates. A 7% annual inflation rate, the highest since 1982, is making everything cost more, including putting in new floors or refreshing a dated kitchen or bathroom.
According to a Remodeling magazine survey of real estate professionals, the average recoupment of 22 popular projects came in at about 60% nationally in 2021. That's down from 63.7% in 2020 and 66.1% in 2019. Some upgrades can add perceived and actual value to a house for sale if you're considering selling, making it stand out to buyers and offer a good return on your investment.
The way we live in our homes has changed since the pandemic. Homebuyers are looking for specific features when touring a house for sale.
Buyers always appreciate space. However, over the past year, they want even more. The NAHB report What Home Buyers Really Want – 2021 Edition found that buyers wanted a median of 2022 square feet, about 8% more than they currently have. Specifically, 46% were looking for three bedrooms, 37% wanted two bathrooms, and 42% preferred a two-car garage. A 2020 survey of real estate agents found that 44% of buyers said the need for more space was their number one motivator. Another 31% cited the desire for more private outdoor space as a top motivation.
Here are some upgrades that will make your home stand out to buyers.
These can be pricey upgrades but make your home more appealing to buyers. If you're not ready to sell, these upgrades can improve your quality of life while adding to your home's resale value when it comes time to sell!
The trend for remote work was growing before the pandemic. The need for home office space exploded as we were forced into working from home in the early days of the pandemic. Even as we slowly return to the office today, remote work is here to stay.
A 2021 survey by Home Light found that 60% of top agents cited a home office as a top priority. Today, buyers care about a home office more than whether a home is move-in ready. Some buyers are looking for multiple home offices.
Creating a new room or dedicating existing space for a home office is a good investment if your buyers telecommute. Home Light data from mid-2020 indicates that a home office adds over $10,000 in resale value. Today, that number might be even higher as the hybrid work model takes hold.
Options include converting a walk-in closet or building an accessory dwelling unit. The estimated value that an ADU adds has gone from $47,600 to $66,000 since pre-pandemic times.
If you have an unfinished basement or attic, you have potential livable space future buyers can enjoy. Whether as a home office, a home theater, an extra bedroom, or an in-law apartment. according to HomeAdvisor, a finished basement between 400 and 1500 square feet has a potential ROI of 75%
Adding heated square footage bumps your house value to another level. Today, an unfinished basement adds $15,000 to $20,000 in value. A finished basement can add $40,000 to $50,000 to your asking price.
Buyers today love an open concept floorplan. People need a dedicated space to work, but they still want to entertain and enjoy time with family and friends. NAHB's survey found that 85% of buyers want an open floorplan between the kitchen and dining room. 79% prefer an open arrangement between the kitchen and family room.
While an open layout is great for adding natural light, you should speak with a contractor before knocking down any walls!
Simple exterior upgrades to your home's curb appeal can add significant value to your home. These affordable upgrades can grab a buyer's attention before opening the door!
Curb appeal impresses buyers before they enter your home. Attractive landscaping implies you maintain your home. In fact, buyers will pay a 7% premium for a house with stunning curb appeal. The highest ROI for curb appeal is in the Northeast, where an investment of about $3600 for curb appeal upgrades can yield a $14,800 bump in resale value for a 309% ROI!
Basic lawn care like cutting the grass, fertilizing, and controlling weeds costs around $340 but offers a 539% ROI!
Is your garage door looking worse for wear? Is it a dated design compared to your neighbors? A new garage door is another inexpensive way to add value. According to Home Light, a new garage door costs around $1200 but can add an average of $2797 in resale value for a 133% ROI.
If you live in a city, or town where street parking is at a premium, consider adding a concrete parking pad. It costs around $1200 and is a considerable upgrade in the city. It's affordable and can add significant value and up your asking price!
We've embraced the physical and mental benefits of being outdoors in the past few years. Today, outdoor living ranks third on the list of homebuyers' priorities, behind only a home office and excellent schools. Here are a couple of outdoor upgrades that can add resale value.
A deck or patio is the centerpiece of an outdoor living space. It's a place to eat dinner, entertain, have a drink, or work outdoors on a beautiful day. A deck can add over $7000 in resale value. You can build a deck for around $4380 to $10,000, so you'll likely break even or see a positive ROI for this upgrade.
54% of agents surveyed by Home Light said that 54% of their buyers cited having a fire feature, like a fire pit or outdoor fireplace, as a top priority. It's a great place to spend time with family and friends. An outdoor fireplace adds an average of $5700 in value.
Once reserved for luxury homes, today, everybody wants an outdoor kitchen! Along with a built-in grill, outdoor kitchens can include cabinetry, a bar, sink, and standard kitchen appliances. They can even include an outdoor flatscreen. The value of outdoor kitchens has increased since the pandemic. Pre-pandemic, an outdoor kitchen added $6100. An outdoor kitchen adds about $9800 in value in today's market.
These are just a few upgrades and projects that can add significant value to a house for sale. If you're considering selling your home, simple improvements can add interest to buyers and drive up your asking price.
As you look around your home and consider which upgrades are worth the investment, first consider your quality of life. If you're planning on selling in the future large projects like adding square footage can enhance your current enjoyment of your home, but when you decide to sell, they can add resale value.
If you're planning on putting your house for sale, look at any upgrades from a potential buyer's perspective. Does your home lack the modern features and amenities that a remote professional needs to balance family, work, and relaxation? Maybe it's time to add a dedicated home office or outdoor kitchen. If you're not sure, speak with a local Realtor®. They can tell you what buyers in your area value most.
The housing market has certainly been interesting in the past few years. The past year has seen limited supply and growing demand for the rental market and home sales. In fact, despite historically low-interest rates, the industry had an extraordinary booming year. 2021 showed the most significant annual gains in single-family house values and rental prices, low foreclosure rates, and the highest number of home sales in 15 years.
Rental prices kept pace with housing. Rental prices for single-family homes increased 7.8% in 2021, an all-time high according to CoreLogic. The rental market exploded as remote workers and young families fleeing the cities spurred double-digit increases in rental costs and squeezed supply.
With rental prices, home prices at all-time highs, and a tight housing supply, is it time to think about buying a home in 2022 instead of renting?
While the market in recent weeks has begun to cool a bit, it's still competitive. Since a home is likely one of the biggest purchases you'll make, it's essential to take some time and make an informed decision.
According to Redfin, as of June 30, 2021, the median sales price of a home in the U.S. was $386,888, a 24.8% year-over-year increase. The massive spike in demand in many markets has allowed for higher sale prices. This can often make it hard to decide whether to continue renting or purchase a home because you don't want to overpay.
Rental prices have also increased by double digits in most markets. According to Redfin, rents jumped more than 14% in December 2021, the most considerable rise in more than two years. However, in many major metropolitan markets, rents have skyrocketed. In Austin, Texas, New York City, Boston, several areas in Florida, and other cities throughout the country, rents have jumped by 35 to 40% year over year.
Add to this the fact that there is less housing available for sale or rent than in the past 30 years. With supply shortages worsening and growing inflation contributing to rising rental costs, it becomes difficult deciding whether to rent or buy.
While rental prices in the U.S. initially dropped when COVID-19 hit, prices rebounded strongly in 2021 and quickly outpaced pre-pandemic trends. As a result, rental prices have far outpaced wage increases.
Housing market predictions are about as reliable as the five-day weather forecast. The truth is that no one can predict what will happen with 100% accuracy.
However, many industry experts predict continued strong price appreciation, scarce inventory, and high demand. Overall, the housing market is doing well and will most likely not crash in 2022. The trends and forecasts for the next 12-24 months show that the market will most likely stay strong, with many of the factors that drove prices to new highs in 2021 remaining firmly in place. Last year, homeowners saw a market where properties sold quickly and often above asking, as numerous buyers fought for limited inventory.
Last year prices increased by an unsustainable 18.8%. The market is even tighter than it was before the spring 2021 frenzy. Experts like Zillow increased their bullishness in January, predicting growth of up to 16.4% in 2022. They recently adjusted anticipated price growth to reach 22% by mid-year. However, price growth is expected to slow through February of 2023.
Fannie Mae is predicting that by mid-2023, price appreciation will return to the pre-pandemic rate of 5% annually. They also expect that mortgage rates will rise modestly, providing some relief to buyers as prices climb. Slowing price appreciation and potentially increased inventory could help avoid a crash in 2023. The main downside risk continues to be increasing inflation. As mortgage rates increase, refinancing activity will soften as rates gradually rise and the Fed works to tame inflation.
There is no single answer to this question, as there are both pros and cons to both options. However, there are a couple of factors to consider in your decision-making process. First are your finances. In a typical market renting is often the more affordable option. That being said, this is not a typical housing market. Rents have increased to the point where even as mortgage interest rates rise, buying a home might be a better option.
Ultimately, your choice depends on several considerations. One major factor is your personal finances.
In terms of lifestyle considerations, consider what is important to you. Are you seeking the flexibility to move if your career requires it, or are you looking for stability to put down roots in a place you can call your own? Here are five considerations to explore before you make a final decision on whether to rent or buy.
Are you planning on putting down roots in the community? If you're planning or have a family, are you happy with the schools? If you're sure you'll stay in the same place for at least five years, buying can make sense. It can be a good fit both personally and financially.
However, if you don't have kids or get that big promotion but it's halfway across the country, the smarter choice might be to rent. While you can buy a home and sell it in a few years if your situation changes, the costs like moving, closing costs, and repairs may not be worth it.
In the past, renting was almost always cheaper than buying a home because of the upfront costs involved, like the down payment, closing costs, moving expenses, and renovations. In today's market, rental prices have risen to the point where it may cost you more each month to rent than a mortgage payment. However, there are other ownership costs to consider, like property taxes, homeowners insurance, and HOA fees in some instances.
However, even in a traditional market, buying a home is almost always cheaper over the long term. According to the National Association of Realtors, a homeowner's mortgage payment is lower than that of a renter after six years. This assumes that the rent increases at 5% annually and the homeowner is paying a fixed monthly mortgage.
Things change. It can be hard to predict where life's road will take you. If you intend to stay in one place, close to family, or planning on raising a family, and you have the means, buying a home makes the most sense. Examine your current situation and whether it could change in the next few years. For example, if you're moving up in your career and an opportunity for a promotion comes up, but it is on the other side of the country, renting is probably the best choice. Think about your current lifestyle and where it will be before buying a home.
You need to be realistic about your financial situation when deciding between renting and buying. Once you analyze the costs involved, be honest about whether you can afford to own a home's upfront and ongoing expenses. The worst situation to be in is where you have a home but are cash poor and unable to enjoy life!
Consider all the factors when deciding on buying a home or continuing to rent. Renting and buying both offer pros and cons. In reality, your lifestyle, future plans, and financial situation will be the primary factors to consider when making a decision. Speak with a Realtor® or your financial advisor if you need additional information or are unsure which choice is right for you.
We have been enjoying historically low-interest rates for several years since the crash of 2008. In 2020 and 2021, mortgage interest rates fell to record lows. Because of COVID, the Federal Reserve's emergency actions helped push mortgage rates below 3% and kept them there.
Today in 2022, as the economy is trying to recover, mortgage interest rates are rising. The Federal Reserve has projected further tightening as they continue to intervene to get the money supply under control. That means interest rates will likely continue higher. The thirty-year rate briefly hit over 5% in April for the first time in a decade. If you're considering refinancing or buying a home, it might be wise to lock in a rate.
Historically, 30-year mortgage rates have averaged just under 8%. So even as today's rates inch past 5%, they are still a relatively good deal.
Even with the recent rate increases, today's thirty-year mortgage rates are below average historically. Freddie Mac is the industry source for mortgage rates and has kept records for over 50 years. Between April 1971 and April 2022, the rate for a 30-year mortgage averaged 7.78%. So, today's rate, even at 5%, is still below the average.
In 1981, the mortgage rate was 16.63% on average. Rates reached an all-time high of 18.63% on October 9, 1981 – almost five times the 2019 annual rate. Here's some perspective:
In 2021 30-year mortgage rates plummeted as a result of the COVID pandemic. These record-low rates were a result of government policies to save the economy. Rates were never meant to sustain that level. The more world economies recover from the pandemic's economic effects, mortgage interest rates are likely to continue rising and approach their historical average.
In the first quarter of 2022, the rapid economic recovery and the Fed pulling back on stimulus programs caused rates to spike. According to Fannie Mae, the 30-year rate jumped from 3.76% to 5.11%. An increase of 1.35% in just eight weeks. Rates will likely continue to rise throughout the year as the Fed tightens. Where they'll peak is impossible to predict.
Even as interest rates creep up, it's important to remember that home loans are personalized to the buyer. Tracking mortgage rates can help you see trends, but not every buyer will benefit equally from today's rates.
Several factors are considered by lenders when you apply for a home loan. They include:
Credit Score – If your score is over 720, you'll have a better chance of securing a lower rate. Even if you have a sub-600 score, programs from the USDA, FHA, and VA loans are available. If you're planning on applying for a loan, it might be worth it to give yourself some time to improve your credit score. It could save you thousands of dollars over the life of your loan.
Down Payment – A higher down payment can lower your rate. Most mortgages, including FHA loans, require 3 or 3.5% down. Some loans like VA and USDA loans are available with a 0% down payment. If you make a 10 - 20% down payment, you might qualify for a conventional loan with low or no private mortgage insurance. This can reduce your monthly cost significantly!
Loan Type – The type of loan you receive will also affect your interest rate. However, this hinges on your credit score. For example, if your score is 580, you may only qualify for a government-backed loan like an FHA mortgage. FHA mortgages come with a lower interest rate but require mortgage insurance no matter how much you put down. Adjustable-rate mortgages typically offer lower introductory rates. However, those rates can change after an initial period.
Loan Term – While we have been focusing on the 30-year mortgage rate, with a 15-year mortgage, you would have a higher monthly payment, but they tend to have a lower interest rate. Even with a slightly higher monthly payment, a 15-year loan can save you thousands of dollars in interest throughout the life of the loan. For example, at 3% a $200,000 30-year loan would cost $103,000 in interest charges. A 15-year fixed would cost about $49,000 in interest.
Discount Points – You can purchase discount points to lower your interest rate. A discount point costs 1% of the home loan amount and reduces your interest rate by 0.25%. As an example, for a $200,000 loan, each discount point would cost $2000 upfront. However, the buyer recoups the investment over time thanks to the lower interest rate. Skip the discount points if you're planning on selling or refinancing within a few years.
For several decades, mortgage rates have been declining from their all-time highs. We have enjoyed historically low rates for over a decade, hitting a record low in 2021 due to the pandemic. Rates are on the rise but are still significantly below their historical average of 7.78%.
While it's a good idea to keep an eye on the daily rate changes in the market, if you are considering the purchase of a home and get a good mortgage rate quote today, don't hesitate to lock it in. With rates on the rise, if you can secure a 30-year mortgage rate below 5%, you're paying less than most American homebuyers throughout history! That's still a pretty good deal.
For many of us, homeownership is a source of pride. Your home is also the most significant investment you will make in your lifetime. Homeownership also offers some pretty impressive financial benefits. With every mortgage payment you make, you're building equity and creating wealth for yourself. Equity is the primary advantage ownership offers over renting. A mortgage benefits you while paying rent benefits your landlord.
As a first-time buyer, your priority is to buy a property with a mortgage that fits your budget. For many homeowners, creating an at-home side hustle or using your home to generate some additional income can help you pay your mortgage or other costs like your real estate taxes, homeowners insurance, or even to pay for upgrades or renovations to your home.
If you're a new homeowner or just someone who would like to create a little revenue from your property, your house can generate the additional income you need to take that dream vacation or pay for your new kitchen!
In this post, we're going to look at several income-generating opportunities to help you decide which might be right for you!
With a little creativity, your home can contribute to your income and be a place to live. Before you make any decision check your local building code for any restrictions your city or town may have for residential homeowners. Also, if you live in a condo, coop, or have a homeowner's association, they may have their own rules on short-term rentals.
Here are seven potential ways to make money with your home.
Whether you live alone, travel for extended periods, or take a family vacation, you can earn some extra income as a residential homeowner. Renting your home through sites like Airbnb.com or HomeAway.com is a relatively simple and reliable way to make some income on the side. You'll need to register to create a free listing where you can set the rental amount, dates of availability, and a refund policy, should a reservation be canceled. You'll pay a 3 to 5% service fee for confirmed rentals based on the rental amount.
Don't want to rent out your home? If you live in a city with a lack of parking, consider renting your driveway! Tourists, renters who don't have a designated space, or commuters tired of battling for a metered spot are all your potential customers. Check out JustPark.com or CurbFlip.com to learn more. Like Airbnb, these sites charge a fee for short and long-term bookings.
Ever wonder how those great homes from your favorite TV show or movie made it onto the screen? You know the ones we're talking about that Hollywood rambler that was home to the Brady Bunch or the red brick McMansion that Home Alone made famous.
If you think that your home has the right stuff, you might be able to cash in by connecting with location scouts for TV and film productions. How do you get started? Have professional pictures taken of your home and send them along with your contact information to local film commissions, location scouts, and film commissions in your area.
There is an affordable housing crunch in various markets throughout the country. Some municipalities have changed zoning laws to allow residential homeowners to create and rent alternative dwelling units. If you live in an area where it's legal, you can add a rental suite to your property. If you don't have the space inside, consider converting the garage, or if you have the space, building rate free-standing structure. Make sure to check with your local building department before you renovate or build.
If you live in an area like the beach or a ski resort area, residential homeowners can often earn significant rental income in a single season. If you can move out for the season or are planning on taking an extended vacation, you can make a year's worth of mortgage payments in a season. If you don't live in a resort area, being close to a college, hospital, big employer, or an area with a tight rental market can make your property desirable.
Maybe your kids have grown up and moved out, and you have several rooms available. Why not maximize your income by turning your home into a Bed and Breakfast! Being able to rent our several rooms in your house nightly or weekly can be a lucrative option. Make sure you research what it takes to start and operate a B&B before you open!
Your home might be the perfect place to start a small business. After all, Silicon Valley is full of stories about computer companies like HP getting their start in the garage! Running a business from home can be convenient and offer the added bonus of home office tax deductions. Some home businesses require certifications, licensing, or permits to operate. Check with your local government.
There are two critical points to consider for residential homeowners before opening your home (or driveway) to renters. The first is insurance. You may void your policy in the event of a fire, flood, or other catastrophes if you're using your home in ways not outlined in your homeowner's insurance. If you choose to use your property to generate income, acquire the proper insurance.
Another consideration is to make sure you can handle it. Renovations can be expensive, and not everyone is cut out to host a Bed and Breakfast. However, if you've done your research and carefully thought out your decision, you can start using your home to generate extra income today!