Homeowners are fixing up instead of moving out, report finds

(InvestigateTV) — More than a quarter of homeowners are now using money once set aside for their next home to renovate the one they are in, according to a new Bank of America report.

Matt Vernon, head of consumer lending at Bank of America, said the shift comes down to affordability and interest rates. Many homeowners are locked into low mortgage rates, making the prospect of selling and buying something new a more expensive proposition.

Vernon said the decision to renovate rather than relocate is also driven by attachment to existing communities.

“We also found homeowners truly love the home they are in — so rather than taking a big leap and moving neighborhoods, moving schools, moving cities, moving friend groups, they’re just investing back in,” Vernon said. “And a lot of that focus is on things that are going to present value in the future should they ultimately want to sell that home.”

He said homeowners looking to improve their properties should prioritize upgrades that serve the family now and add resale value later. He added the most impactful areas tend to be functional spaces.

“Redoing that kitchen that’s been out there for 10 years, adding a bathroom, updating bathrooms — really those functional areas,” Vernon said. “As well as, believe it or not, outdoor space and creating that environment indoors and out that is attractive to those prospective homeowners in the future.”

Vernon said homeowners should be cautious about upgrades that may not appeal to future buyers. Features like home theaters, indoor gyms and themed entertainment rooms may be appealing now but could be difficult to recoup at resale.

He added many homeowners are currently sitting on significant equity and could tap into it through a home equity line of credit to help fund renovations.