The market's hot. Who wouldn't want to want to cash out and find something new?
More recently, lots of people. Homeowners are more and more likely to stay and invest in home improvements rather than selling.
There is an appeal in knowing that you are sitting on a home with high value, and there are benefits to living in a remodeled home.
It’s a trend that has played out with increasing frequency not only in the metro area, but across the country and especially in the western U.S. Homeowners undertook more home projects in the period of February 2016-17 than in the previous year, and spent about $1,850 more, on average, according to HomeAdvisor’s 2017 True Cost survey.
There’s also a generational dynamic at work: baby boomers led the remodeling charge, followed by millennials. But the boomers were more likely to hire out the upgrades, while the younger generation leaned toward doing it themselves.
In addition to that, notes HomeAdvisor chief economist Brad Hunter, millennials are more likely to stay and increase their home improvement spending. And they have some favorite projects, like finished basements, which they’re twice as likely to take on as are boomers.
“My hypothesis around that is they may have bought a small starter home a couple years ago, and it has gone up in value, so they tap into their equity and add space in a home that they’re already outgrowing,” Hunter said.
Plus, millennials are finally “coupling up,” he added, and having children at a higher rate.
“That was a question hanging over the demographic community,” Hunter said. “Are they ever going to settle down? They’re just doing it later.”
Homeowners who have lived in their homes fewer than six years or more than 11 years spent the most on home projects, while those in that middle ground spent the least. Data revealed those in the West and Northeast to be the biggest spenders, often taking advantage of high home equity to tap into loans for the improvements.
Hunter sees that as a huge driver of home remodels.
“We’ve seen double the average equity in the Denver market in the last five years,” he said. “That has a few effects on people. One, it makes them more confident because they feel richer. Two, it gives them better access to funding they might need, whether they take out a home equity loan or line of credit, or just dip into savings.
“It all goes back to being more confident. If they dip into savings, but know they have the paper wealth, they’re more prone to do it.”
Even if homeowners do cash out to take advantage of equity and the sellers’ market, they can run into trouble trying to find something comparable if they choose to remain in the area. And good luck trying to upgrade, unless they have extra cash or want to take out another mortgage.
Orley Paxton, owner of Handyman Hub that connects homeowners with the right contractors, and who launched Pilloud on her bathroom remodels, said that improvements tend to be the more cost effective course for those looking to remain in the Denver-area market.
“If you sell, and you want an upgrade, you’re buying into an expensive housing market as well, so you’re not going to get a lot,” he said. “We’re finding that, as prices continue to escalate, you can spend $15-20,000 on a couple of bathrooms and you’ve got a nice house again and can enjoy it.”
Statistics on new home starts — including condos and townhomes — in metro Denver put those who would cash out and move in a similar quandary. Fewer than 1 percent of starts in this year’s first quarter were below $300,000, compared to 3 percent in 2017, according to Metrostudy, a home construction tracker.
And only 22 percent were priced under $400,000, roughly half the percentage of two years ago.
Recently, bathroom re-dos passed kitchens as the most common home improvement project, according to a survey by the National Association of Home Builders.
There are many good reasons to remodel rather than relocate, and our West + Main agents have a lot to say.
“If you love your location and just need more house a good option is to use the equity in your home to add on, pop the top or simply remodel. Many people are finding to stay in their neighborhood and buy they don’t feel like they get what they want for what they would have to spend. For example in Washington Park, buyers are disheartened to see that if they buy a bigger house they are looking at a $800,000- 1,000,000 price point and some feel like they would still have to update making that not an option for them. I have seen one family instead stay in their current home they purchased around $450k, put $200k into popping the top and now their value is sitting at $1.2m. This was a much smarter financial route for this family.” -Nicole Rufener
"Remodeling allows you to continue to generate equity while allowing the finishes to be a reflection of you and your family. This is a great option for people who need to stay in specific school districts etc." -Krystal Thompson
"Because Colorado's housing inventory is so tight, we are seeing many people decide to turn their home into the house they want, rather than selling and moving. It's important to remember, though, that you will not necessarily see a full return on that investment when you DO decide to sell. Consulting a Realtor before making any improvements can help you to decide how much remodeling you should do while not pricing your home out of the neighborhood's value range." -Stacie Staub
“We are finding in this market of rapidly accelerating home prices, that a good number of homeowners are opting to stay put in their existing homes and remodel instead of move. Many people love their neighborhoods and just want a bigger or more updated home in the same area. Using the equity that has built up over the years, it can be much more cost effective to redo the kitchen, pop the top, or add an addition, than to try to find a replacement home that they can afford, in the community that they want to live in.” -Sue Perrault
Think that selling might be better for you than remodeling?