Time to Reality Check the Real Estate Market
By Ben Steverman of Bloomberg
For a few years, carpets have been allowed to fray, faucets to drip and paint to peel. Now, home-improvement spending may be rebounding. Harvard University's Leading Indicator of Remodeling Activity suggests spending will be up 16.6% by the middle of 2013.
To see what projects homeowners are likely to pursue and what they'll spend, Bloomberg.com used survey data from Houzz, a home-improvement website and application. Estimates on potential payoffs from projects come from Remodeling Magazine, which asks appraisers and others how much hypothetical projects recoup their cost in the form of increased home value. Projects are ranked from most to least expensive.
Cost estimates and most other data come from a survey of 29,000 Houzz users. We used National Association of Home Builders estimates on how long improvements should last.
Forget Starter Homes! First-Timers Trade Up
More first-time home shoppers say they want a house they can “grow into” not a home they can quickly grow out of.
With big housing bargains and low mortgage rates, some first-time buyers have decided to go big with their home purchase and sidestep the traditional smaller “starter house.”
A growing number of real estate professionals are reporting that childless, twentysomethings who have strong incomes are taking advantage of housing deals and looking for their dream house now, rather than wait until later.
A Minneapolis couple purchased a 3,000-square-foot-home as their first home. "The more starter homes we saw, the less impressed we became. … Since we knew we could easily afford to buy more than we were initially looking to spend, the choice was quite simple," Joseph Simons told the Minneapolis Star-Tribune. "Why not buy a forever home with everything we want?"
Indeed, more buyers are purchasing a home with intentions to live in it longer than they once did. On average, buyers now expect to stay in their house 15 years compared with 10 years in 2010, says Walter Maloney, spokesman for the National Association of REALTORS®.
Steve Howe, a sales agent for RE/MAX Results in the Minneapolis area, says one big driver for first-time home buyers to to go big on their first home is low mortgage rates. Howe says first-time buyers worry that mortgage rates — the cost of borrowing for a home purchase — will never be this low again so they want to take advantage while they can.
"If they can lock in a $300,000 or $350,000 mortgage at 3.5 percent, that's as good as gold," Howe says.