Homeowners prefer renovating current home to buying new one

Homeowners looking for a change in living arrangements have two main options: moving to another home or renovating their current residence. According to a recent report by the real estate site Zillow, more than three-quarters of Americans prefer the latter option.

In its Housing Aspirations Report, which included survey results from 10,000 people in 20 major American cities, 76 percent of respondents said they would upgrade their current home rather than move if they received a set amount of money. Older respondents were especially likely to stay put, with 91 percent of retirees and 87 percent of those ages 55 and up saying the money would go toward renovations rather than the purchase of a new home.

Respondents in Boston and Detroit were least likely to move in the event of an unexpected in windfall. In both metro areas, 80 percent said they would upgrade their current home instead.

Conversely, renters and respondents between the ages of 18 and 34 were most likely to say they would purchase a new residence if they received a set amount of money. Los Angeles respondents were the most likely among all cities to say they would move, but just over two-thirds of these respondents said they would stay put.

Homeowners choose to remain in their current residence for a variety of reasons, but the current real estate market has strongly influenced this decision. Rising home prices and increased competition have made sellers in many markets concerned about their ability to find another home after selling their own property. Mortgage rates have also been creeping up, so homeowners seeking to trade up or downsize might find that their new loan has a significantly higher interest rate than their current one.

"Even in a seller's market, simultaneously buying and selling is an exercise in frustration," said Skylar Olsen, director of economic research and outreach at Zillow. "Add to that the emotional history between you and your home, and it's no wonder low inventory has been in a self-fulfilling cycle. Homeowners may hesitate to sell because of limited options for them as buyers, but by holding on to their homes, they are themselves contributing to low inventory."

Many homeowners are also generally satisfied with their current home. In the Zillow Group's recent Report on Consumer Housing Trends, 83 percent of respondents said they love their current residence. Sixty-three percent said they don't have any plans to sell their home at the moment.

Homeowners who are deciding whether to renovate their current residence or move to another home face a number of considerations. Jamie Wiebe, writing for Realtor.com, says renovation might be the best fit if your home is unique or has features you enjoy, or if you enjoy the neighborhood.

Upgrading your current home can be a good solution if you are looking to add a specific feature, such as an in-law apartment for an aging parent. Jeffrey Steele, writing for the financial site Bankrate, says you can often make your home more functional by adjusting its layout.

It's important to take a realistic look at the costs and scope of a renovation project, though. You should understand how much the work will cost, and plan for unexpected cost overruns. An extensive renovation can also take several months, and you may need to relocate during that time. Understand that most projects will only recoup a portion of their costs with an increase in the home's value, and that "over-improving" can actually hurt the resale value if the work puts the property out of sync with comparable homes in the neighborhood.

Moving is the best option if you are seeking features that a simple renovation can't give you, such as a bigger yard or better school system. Wiebe says moving is also a good option if you live in a market that has seen strong price growth and buyer demand, if city officials don't approve your renovation plans, or if you think renovating won't be worth the cost and hassle.

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