The Declining Allure of Fixer-Uppers: What's Trending Now?
Homebuyers Shy Away from Renovation Projects: Implications for Your Home-Buying Experience
In a shift from the past, potential homebuyers are leaning towards move-in-ready properties, as the appeal of fixer-uppers seems to be waning. According to Amanda Pendleton, Zillow's home trends expert, the current climate is causing buyers to do the math and recognize that fixer-uppers might end up costing them more in the long run [1]. Here's why move-in-ready homes are quickly taking the limelight, and what this trend could mean for sellers of fixer-uppers.
The Roots of the Fixer-Upper Craze
To understand the current market for fixer-uppers, it's essential to take a quick glance at history. Fixer-uppers first gained popularity in the mid-2010s, with shows like Fixer Upper and Property Brothers making renovation projects accessible, fun, and profitable for viewers [2]. However, as these properties entered the mainstream, buyers were soon competing fiercely for them, driving up prices and sinking any potential savings [2].
Today's Changing Tide
Several factors have contributed to the decreased interest in fixer-uppers. The cost of building materials has soared due to inflation, labor shortages have caused home-improvement projects to run longer and cost more, and higher interest rates mean a higher payment on a construction loan [1]. Additionally, home values are not appreciating as quickly as they were during the pandemic, making it difficult to build equity and break even on a home [1].
The Zillow study reveals that buyers are currently paying 3.7% more than expected for remodeled homes, with homes that have been remodeled receiving 26% more daily shares on Zillow's app when compared to fixer-uppers [1]. In fact, fixer-uppers are selling for 7.3% less than other similar homes, which is the largest discount seen in the last three years [1].
Cash Flow Conundrums
Fixer-uppers can seem appealing because they come with a lower price tag, translating to a lower down payment and lower monthly mortgage costs [1]. However, buyers must calculate the true scope and cost of renovations before jumping in. With limited financing options, first-time buyers could struggle to qualify for a mortgage [1].
The Buyer's Paradox
Even those intrigued by a renovation challenge find the current market daunting. "A lack of inventory, fluctuating interest rates, and a marked lack of consumer confidence all contribute to a withering interest in fixer-uppers," states Gerard Splendore, a broker with Coldwell Banker Warburg [2]. Many young buyers simply don't have the funds to cover the down payment and the significant expenses of a renovation project [2].
Selling a Fixer-Upper: Adapting to the Market
If you're a seller hoping to offload your fixer-upper, you might need a different approach in today's climate.
Timing Your Listing
Sellers must strategize their listing to meet the market, with the help of a local real estate agent who can offer an effective pricing strategy [1]. Aim to list your home as early as possible to gain maximum exposure on the Multiple Listing Service (MLS) [1].
Pricing Your Home
Pricing your home correctly also plays a crucial role in attracting potential buyers [1]. Analyzing comps in the neighborhood can help determine if the home is reasonably priced for a fixer-upper, and setting a competitive price from the start will increase your chances of a quick sale [1].
Pre-Sale Inspection
Before listing your home, consider scheduling a pre-sale inspection to give potential buyers a clear understanding of its condition and the estimated cost of any necessary repairs [1].
In Summary
While fixer-upper properties may no longer represent the bargain they once did, certain buyers may still find value in these properties. "Fixer-uppers can still be a smart investment for someone with extra savings who is looking to put their own stamp on their home and plans to be there for the long term," states Amanda Pendleton, Zillow home trends expert [2]. Prior to diving into a fixer-upper project, it's crucial to consider all costs involved and make calculated decisions.
- Zillow. (2022). The State of the market: 2022 Q1
- Zillow. (2021). Fixer-uppers: Once popular, now popular again
- Bankrate. (2022). First-time homebuyer mistakes to avoid
- Realtor.com. (2021). Why some sellers are choosing to do the fix-ups before they sell
- Amid the rising costs of building materials, labor shortages, and higher interest rates, potential homebuyers are increasingly choosing move-in-ready properties over fixer-uppers, as revealed by the current climate and Zillow's home trends expert, Amanda Pendleton.
- One reason for the decreased interest in fixer-uppers is that buyers are now paying 3.7% more than expected for remodeled homes, with remodeled homes receiving 26% more daily shares on Zillow's app compared to fixer-uppers, according to a recent Zillow study.
- Fixer-uppers once seemed appealing due to a lower price tag, translating to a lower down payment and lower monthly mortgage costs, but buyers must carefully calculate the true scope and cost of renovations before jumping in, considering that limited financing options may hinder first-time buyers from qualifying for a mortgage.
- The current market is daunting for potential buyers seeking a renovation challenge due to a lack of inventory, fluctuating interest rates, and a marked lack of consumer confidence, causing a withering interest in fixer-uppers, as stated by Gerard Splendore, a broker with Coldwell Banker Warburg.
- Sellers looking to offload their fixer-upper may need to adapt to the market by strategically timing their listing, pricing their home correctly, and considering a pre-sale inspection to give potential buyers a clear understanding of the home's condition and estimated repair costs.
