MReport September 2022

TheMReport — News and strategies for the evolving mortgage marketplace.

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56 | M REPORT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Affordability Constraints Fueling Renovation Projects While more housing inventory is becoming available, home prices and mortgage rates hikes are still limiting many homebuyers from purchasing. A new study reveals that 55% of homeowners reported renovating in the past year rather than continuing their new home search. W ith the housing market gradu- ally returning to pre-pandemic norms and mortgage rates surging over 2.5 percentage points in 2022, many homeowners are choosing to renovate their living spaces rather than search for a new home. According to a new study by House Method, 55% of home- owners reported renovating a part of their home in the past year. With affordability constraints at the forefront for many, some homebuyers and sellers have halted their searches and chosen the renovation alternative. Key Statistics: • Some 27% of homeowners tackled a bathroom renovation, making it the most popular room in the house to update. • Nearly 50% of homeowners' timelines were extended past their original expectations. • Roughly 93% reported a better quality of life after finishing their renovations. • An overall 80% of homeowners reported going over budget by at least $500. • An estimated 57% of homeown- ers reported increases in ap- praisal value after a renovation. • The largest demographic of ren- ovators was made up of Gen X and millennials, accounting for over 55% of all renovators in the survey. Top Reasons Why Homeowners Are Renovating Their Homes While return on investment (ROI) is always a consideration when remodeling a home, House Method found that the major- ity of homeowners remodeled to increase the enjoyment of their living space. Upgrading, modern- izing, and safety were also key contributing factors. In fact, 93% of those surveyed claimed that the renovations were worth the time, money, and any temporary discomfort caused, and more than three-fourths of homeowners stated that they intended to stay in their homes after renovating. The Most Renovated Rooms in the Home Unsurprisingly, bathroom and kitchen remodels topped the list in popularity, making up a com- bined 50% of all home renovations. While these two rooms are often the most expensive reno- vations, homeowners reported increased functionality and usabil- ity of kitchens and bathrooms as key determiners of their enjoy- ment of each space. The most popular renova- tions by room were: • Bathrooms • Kitchens • Living rooms • Primary or master bedrooms • Basements Laundry rooms, offices, and guest bedrooms were also reno- vated, but at a much lower rate. Millennials completed the major- ity of home renovations, account- ing for nearly 50% of all bathroom renovations and over 40% of kitchen renovations. Gen Z, Gen X, and boomers accounted for the rest of the renovation market, trailing behind millennials. Homeowner Headaches The most common remodel- ing headache for homeowners involved working with contrac- tors. Many of those polled chose not to take the traditional route of hiring a contractor to oversee or complete the work, and 60% reported not using a contractor at all. The reluctance to work with contractors may be due to a perceived skepticism about their trustworthiness. Some 30% of those surveyed attributed this fear, or a prior negative experience, to their decision to handle the work on their own. Among those who did opt for help from a professional, 26% chose their contractor after receiv- ing and comparing two bids, while others collected more than 15 separate bids before making a final decision. Other common homeowner headaches included: • Delays on the project • Going over budget • Securing permits for the work • Structural problems with the home Money Management During the Renovation Process Budgeting plays a large part in renovating a home. Of the 1,000 homeowners polled, 32% reported budgeting $5,000-$10,000 for their reno project. Although many homeowners set a strict budget, nearly 80% of survey participants still went over their original allotted budget. The most costly factors during the renovation process were materials and timeline delays. Others re- ported breaking their budget due to structural issues and design and furnishing costs. As seen in the graphic below, 68% of homeowners ended up go- ing over budget by $5,000 or more on their home renovation. Although homeowners face challenges when renovating, they have not been deterred from the renovation process. Seventy-six percent of respondents plan on tackling another home renovation, whether in their current home or a new one in the future.

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