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Home Renovation Popular Alternative To “Trading Up”
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Home renovation is a billion dollar business nationwide, and Ohioans are some of the nationâ€™s top spenders. Some real estate experts predict homeowners will invest more in their current property in the coming years, rather than buy a new one. WOSU takes a look at whatâ€™s driving the remodeling trend.
Itâ€™s a quiet afternoon at Eric Pachtâ€™s Worthington home. Itâ€™s faint, but a bird trills in the backyard. The peacefulness soon will give way to banging hammers and buzzing saws.
Pacht is accustomed to the sounds of renovations and all that comes with like dust.
â€œThis is actually our third project. We re-did the basement about five or six years ago and the kitchen two or three years ago, and now all of the bathrooms.â€
Pacht isnâ€™t alone. According to the National Association of Home Builders, Ohioans are expected to spend $5 million on home renovations this year, up about 4 percent over last year.
There are a couple of factors driving the trend.
For one, thereâ€™s a dearth of homes for sale in Central Ohio. Inventory is half what it was four years ago. Columbus Realtors reported about 8,800 homes on the market in May.
Columbus Realtors president Milt Lustnauer added there arenâ€™t as many new housing developments either.
â€œI think folks are saying, you know what, I canâ€™t really find the house I really want, that extra bedroom, that extra full bath, in a price range that makes sense for us,” Lustnauer said. “And theyâ€™re saying letâ€™s investigate the idea of just remodeling.â€
That was the case for Pacht. Recent empty-nesters, he and his wife considered downsizing to a condo.
â€œWe were somewhat surprised at how expensive they were and some of the workmanship,” Pacht said. “Our homeâ€™s about 20-something years old, so we decided not to sell, but to re-do our home and remodel it.â€
Matt Wyner is a Key Bank vice president. He said with the help of on-going low interest rates, the lending market has flipped from traditional mortgage refinancing to home equity loans.
â€œItâ€™s a way to lower your interest rate…and consolidate debt,” Wyner said. “Do all the different things that people traditionally have used mortgages for without paying the same amount of closing costs that you normally would with a mortgage.â€
And Wyner adds, “In an economy like weâ€™ve been in the last few years, I think potentially remodeling your home, spending a little bit less money, is a lower risk option. And I think thatâ€™s driving some of that behavior.â€
Huntington Bank reports â€œmodest growthâ€ in home equity loans during the first quarter. Nationally, home equity lending is up about 8 percent.
University of Pennsylvania real estate and finance professor Susan Wachter said remodeling is currently the strength of the housing market. But Wachter predicts the spike in remodeling will be a short-term trend as interest rates, home prices and inventory go back up.
“Interest rates are still very low, particularly for home equity lines of credit. So that, of course, makes it affordable,” Wachter said. “Interest rates are going up likely. But right now they’re still very low historically. And secondly, as home prices increase there will be a demand to sell your home at higher prices.”
Real estate industry experts warn against excessive remodeling that is inconsistent with surrounding houses.