At the time of this writing, in December of 2023, inflation is going down, which means interest rates are starting to fall. That’s great. But interest rates are still higher than they were this time last year.
With mortgage rates still relatively high, is it better to buy a new home or remodel the one you already have?
Here’s what to know when choosing between a remodeling project or a new home …
First, What Is a High Mortgage Interest Rate vs. a Low Mortgage Rate?
Mortgage rates near 8% are on the high end, especially after enjoying very low interest rates for the past few years. In mid-December 2023, the average national rate for mortgages was 7.42%, down from an 8.09% peak at the end of October. As mortgage rates start to go back down, you may see rates as low as 5.5%, but it’s always best to check the current national average. During 2020 and 2021, mortgage rates dipped below 3%, an unusually low rate by today’s standards. There’s no guarantee that interest rates for 30-year fixed mortgages will be back to 2020 levels anytime soon.
So, how high could mortgage interest rates go? Right now, interest rates are falling back into a more normal pattern, but there’s always the chance they’ll rise again. Forbes predicts that mortgage interest rates will fall “into the 6% range by the spring of 2024,” so you may want to wait on that move a little longer before shopping for a new home. In the meantime, renovations can make your house more enjoyable to live in, and more attractive to eventual buyers if you still plan to move.
Is It Cheaper to Remodel or Buy New?
When you’re choosing to renovate or move, price is usually a big factor. A renovation has a much lower price tag than a new home, even though interest rates for home remodeling loans may be more than mortgage rates. That home remodel interest rate should apply to a much smaller loan than the price of a new home, so the overall cost is still lower.
Additionally, because there’s a smaller supply of new homes, both in Northern Virginia and throughout the US, home prices are likely to be higher. The house that’s in your budget may need renovations to become your dream home, pushing the cost even higher.
So, Is It Cheaper to Remodel or Build New?
Much like buying an existing home, building a custom home from scratch often comes with a hefty price tag. If you’re planning extremely extensive remodeling for your current home, such as an addition and gutting multiple rooms, it may be cheaper and easier to build a completely new house. But most renovations are less expensive than building an entirely new house just to include those features.
Is Home Remodeling Worth It?
In many cases, yes! If you’re dissatisfied with your home, a remodel can make your space more useable, beautiful and comfortable. Plus, you won’t have to deal with the stress of packing, moving and unpacking.
On a tight budget, it’s better to remodel than buy new. You can often get more bang for your buck with a remodel than a new home. A remodel allows you to tailor your space to your family’s needs, rather than settling for a new home that’s in-budget, but not exactly what you want.
If you need more space, a home addition can add a room or a floor without breaking the bank. Kitchen and bathroom remodels improve your space for yourself and also make it more attractive for potential buyers (if you do decide later that a move is the right plan for you).
When to Start Looking for a New Home
Sometimes, nothing can beat buying a new house. The most important thing that a remodel can’t replace is location. It’s better to move if you’re looking for a shorter commute, a different neighborhood or to be closer to family.
You may also need more extra space than an addition can provide practically. When your home is too small for a growing family, a move may be the only thing that gives you the breathing room you need.
Is Now a Good Time to Renovate My House? Yes: Give Us a Call!
If you’re exploring the idea of starting a renovation or remodel in Northern Virginia, schedule a conversation with Daniels Design and Remodeling. We’ll work with you to make sure you get what you want for a comfortable price.