With so many people working from home — and opportunities to leave limited by the ongoing coronavirus pandemic — many homeowners have found their abodes wanting for more space or amenities. The result is a boom in home renovations that shows no sign of slowing down.
If you’re thinking of doing some nesting and taking on a home renovation project, you’re clearly not alone. Here are the most popular home renovation trends these days, and advice on how to pay for the projects.
What kinds of projects are people doing?
Before the coronavirus pandemic, the most common home renovation projects were kitchen and bathroom remodels. According to the National Association of Home Builders (NAHB), that kind of work is still very popular, but it’s being joined by a new trend that reflects pandemic-related lifestyle changes.
“When we surveyed remodelers, we asked them specifically what projects have you seen an increase in demand for specifically due to the pandemic,” said Paul Emrath, NAHB’s vice president of survey and housing policy research. “One was bathrooms, two was decks and three was kitchens — and four and five were patios and porches.”
Because people are spending more time at home, he said, they’re investing in making their houses and properties more multifunctional.
“I think the obvious explanation is that people think they’re going to be spending more time at home. Rather than going out somewhere, they entertain themselves on their patio or deck,” Emrath said. He added that there’s also been an increase in homeowners adding extra rooms or converting existing rooms into home offices.
How much are people spending?
NAHB data showed that there’s demand for renovations at all price points. The strongest demand is for projects that cost less than $20,000, but demand is up across price ranges, including for large-scale remodels that cost $50,000 or more. The price of a renovation is primarily determined by the scope of work.
Emrath said that there’s no shortage of demand for home renovations, but supply chain issues are causing delays and higher price tags on some projects, and that pattern is likely to hold for the foreseeable future.
“The main reason our forecast isn’t stronger than it is would be due to supply constraints,” he said. Those issues are making things like lumber and other building materials harder and more expensive to come by, and that could be driving up the costs of some projects.
How can I pay for a home renovation?
If you don’t have the cash for a renovation on hand, there are ways to foot the bill on credit, such as a home equity loan or line of credit.
“Appreciation of existing homes is always one of the factors that increases the demand for remodeling as an investment,” Emrath said. “People have more equity in their homes, which helps them get loans, and interest rates on those loans are low, which help demands.”
Similarly, you could take out a home equity loan or open a home equity line of credit, which both use the equity you’ve built in your home to help secure funds. Interest rates on home equity loans or HELOCs tend to be higher than first-mortgage rates, but closing costs may be lower, so they could be a cost-effective option depending on your financial situation.
Some borrowers may also qualify for government-backed home renovation loans, like Fannie Mae’s HomeStyle loan or FHA’s 203(k) mortgages.
The best product for you depends largely on your financial situation and credit score. Here are some of the basic requirements:
|Home renovation loan||Minimum credit score||Minimum down payment/equity required|
|Fannie Mae HomeStyle loan||620||5% down payment|
|FHA 203(k) loan||620||3.5% down payment|
|Home equity loan / HELOC||mid-600s||15% equity|
|Cash-out refinancing||varies by lender||20% equity|
You can also look into taking out personal loans, or even paying with a credit card for smaller projects.
Demand for home renovations is especially strong right now, so there’s a strong chance that if you’re a homeowner, you’re thinking about sprucing up your place. If that’s the case, there are many ways to pay for the project, and you should look at all your options to determine what’s best for you.