Why Fixer-Upper Homes Are So Unpopular Now | WSJ Your Money Briefing

[Music] here's your money briefing for Thursday June 29th I'm J.R Whalen for the Wall Street Journal if home buyers already facing limited choices in a tight Market are turning away from so-called fixer-uppers Wall Street Journal personal finance reporter Veronica dagger joins us so Veronica people have been buying Fixer-Upper homes for decades there are even TV shows about them why are they falling out of favor with Buyers now well one of the reasons is they just don't want to hire a contractor it's a lot of work to do that and it's hard to find them these days but the big factor here is high mortgage rates so buyers are already spending a ton of money to get that mortgage they're spending a ton of money to buy the house some of these houses they're paying a lot for it aren't in the best condition but they're still buying them anyway so if you're already forking out a ton up front there's not a whole lot in your budget left for something like a renovation yeah like you said it's a lot of work it's not like just walking in and hey it's a new home right exactly yeah there's so much to do you have to find the right contractor if you're working remotely I mean that's something to think about too do you want a construction site made out of your home home anyone who's had work done knows how difficult it is to get contractors sometimes to commit to certain timelines and certain costs so that is discouraging people as well what this means right now is that people in general are backing away from buying these renovated homes and are looking for more of a turnkey home experience let's talk a little bit more about interest rates you mentioned that a moment ago how are they affecting fixer-uppers on the market so fixer-uppers are already less favorable for buyers these days because not only you've got your high interest rate on your home loan your mortgage rate is higher than people paid about a year ago but also typically when you renovate a house you need to take a construction loan and the rates on those loans have also increased so you've got higher construction loan costs you've got higher mortgage rates you've also got high property taxes higher property prices all of these things are pressuring buyers wallets not to mention you still have inflation in other parts of your budget depending on what sector you work in you may be worried about your job so there's just so much pressure on buyers right now so they're just not in the mood for any of this what kind of a position is this putting the sellers of fixer-uppers in so basically what's happening now is that if you're trying to sell a home and this is true in many markets of the country of course there's exceptions but in general if you're selling a home that needs repair it's going to sit on the market a bit longer than one that's already renovated unless you do some work on it simple repairs can make your home more salable so for example if you refurbish the hardwood floors or you update the landscaping or you even do neutral colors to the paint like white or Ivory that can help sell your home faster all right so let's look at the rest of the market how has the lower appeal of fixer-uppers affected renovated homes on the market so renovated homes are selling pretty quickly still especially in certain areas of the country like Miami or New York sometimes still seeing bidding wars for certain houses if those houses have the charm and they're in good shape you're probably going to have to pay more for those houses than ask and so in that way it's definitely tilted more towards a seller's market so if people aren't remodeling these older homes the fixer uppers how's that affecting the Home Improvement in Home Remodeling Industries what's interesting is that's not really slowing down and the reason being is that a lot of existing homeowners are the ones doing the renovations still and so you're renovating your house because you want to make that perfect home office or the gym or what have you to your house and so the market for Homeowner improvements and repair projects in the US is projected to reach 484 billion dollars this year and that's up from 328 billion dollars in 2019 so we can see the pandemic had a big boosting effect on this Market also people are staying in their homes many people have these very low interest rates mortgages something like three percent even less than that and so they are less motivated to move if you're less motivated to move and give up your mortgage you're gonna make the most of your home and so you're gonna keep doing renovations even though it's really hard to find a good contractor these days yeah if you got that mortgage a couple years ago you want to lock it in exactly why moved it's these golden handcuffs that some of my colleagues here have written about there's no motivation to move especially if you're going to have to move to a smaller place paying a higher mortgage rate and paying more for the house there's just zero motivation but for buyers can they afford to be choosy in this market we keep hearing about low inventory already limiting their choices yeah so some buyers have to take whatever they can get and that could be a really dilapidated house in certain cases so if you're in one of those markets where those bidding wars are common you still may have to pay top dollar for an unrenovated house and you may have no choice because this may be the only thing you can afford the that's Wall Street Journal personal finance reporter Veronica dagger and that's your money briefing I'm J.R Whalen for the Wall Street Journal [Music] [Music]

Channel: WSJ News

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Keywords: fixer upper, fixer-upper homes, housing market, interest rates, mortgage rates, homebuyers, prospective homebuyers, personal finance, housing, buying a house, tips for remodeling, remodeling a home, high mortgages, utility costs, working from home, construction site, contractor, how to find a contractor, home renovation, general contractor, home improvement, hiring a contractor, high interest rates, home loans, home loans explained, financing a home, how to finance, pfin

Id: MDRH0EzXbVk

Length: 5min 30sec (330 seconds)

Published: Fri Jun 30 2023