Over three-quarters of Americans say they would rather renovate their current home than make a down payment on a new one.
This surprising information was recently released by Zillow in its “Housing Aspirations Report.” The report is based in part on data from Zillow’s annual report on consumer housing trends. In that report, 83 percent of respondents reported they love their home. Similarly, 63 percent said they do not plan to move. This is either out of affection for their current home or simply avoiding the hassle of moving.
Who Would Rather Remodel?
According to the report, the remodeling preference is largely a generational one. Eighty-seven percent of people older than 55 say they would rather renovate than save for a new home. Ninety-one percent of retirees reported the same. However, homeowners may choose to stay in their current homes for other reasons, such as rising interest rates.
Skylar Olsen is Zillow’s Director of Economic Research and Outreach. According to Olsen, “Even in a sellers’ market, simultaneously buying and selling is an exercise in frustration.”
Rising interest rates may contribute to the reluctance to purchase a new home. Homeowners feel an emotional attachment to their low, fixed rates. Furthermore, they may have less buying power now—even with more equity in their current home—than when interest rates were lower.
According to Chief Economist for Realtor.com Danielle Hale, “Although a five percent mortgage rate is historically low, crossing this threshold could have a ‘sticker shock effect’ on some buyers currently in the market.” She went on to warn that first-time buyers in particular might exit the market when that threshold is crossed.
Younger Buyers Still Would Buy
Perhaps unsurprisingly, the most likely households to save for a down payment instead of remodeling were renters and young adults.
“Renters and young Americans between 18 and 34 years old are among the groups most likely to use the money as a down payment,” observed Zillow researchers.
In addition, they noted residents in Boston and Detroit were most likely to renovate instead of buying a new home. In both cities, 80 percent of households said they would simply stay in their current homes and make necessary updates.
Los Angeles, on the other hand, had the largest population of move-ready homeowners, with a full third opting to move instead of remodeling.