The ongoing housing slump has created a dilemma for many homeowners who would like to "trade up" to a bigger, newer or more expensive home.
In a normal housing environment, many people buy homes they can comfortably afford, live in them for a certain number of years, build up equity by making regular monthly payments and through normal price appreciation, and then use this equity as a down payment on their next home.
Well, the past few years have been anything but "normal" in the housing market. Due to falling–or, at best, static–home values, many homeowners have not been able to accumulate the equity to allow them to trade up. And even if they do have the equity, slowing sales make it more difficult to sell the home they have.
In this environment, many homeowners are choosing to remodel and renovate their existing home instead of buying a new home.
There are many potential benefits to this strategy:
- The existing mortgage remains intact so the monthly payment stays the same.
- The closing costs incurred when buying a new home are saved, as are moving expenses.
- Renovations generally increase the resale value of the home.
- The owners will enjoy the renovations while they continue to live in the home until market conditions improve and they may be able to trade up.
But what types of renovations should you make? It's usually smart to make renovations that will provide the greatest return on investment (or ROI) when it comes to resale.
So how do you know which renovations will provide the highest resale ROI? Visit our "Adding On: Be Careful Not to Overbuild" page to learn more.