Should You Renovate or Move? That is the Big Question.

Many buyers' expectations for a home have shifted in the last 18 months. The AIA Home Design Trends Survey results for Q3 2021 were recently announced by the American Institute of Architects. The results of the poll are as follows:

  • More outside living space is desired by 70% of respondents.
  • A home office is desired by 69 percent of respondents (48 percent wanted multiple offices)
  • A multi-purpose room/flexible area is desired by 46% of respondents.
  • An au pair/in-law suite is desired by 42% of respondents.
  • A fitness center/yoga studio is desired by 39% of respondents.

If you're a homeowner looking to add any of the above, you have two choices: modify your present home or purchase a home that already contains the rooms you want. Factors such as these may influence your decision:

  1. A potential desire to move
  2. The cost difference between a renovation and a purchase
  3. Finding an old home or designing a new home that has everything you desire is a difficult task (versus trying to restructure the layout of your current house)

In either situation, you'll require capital, either for the remodeling or for the down payment on your next property. The good news is that you probably already have the money you need in the form of equity in your current house. 

The value of your home is skyrocketing.

Over the last two years, record-breaking increases in home prices have significantly increased homeowners' equity. The graph below shows the average home equity gain in the first quarter of the last nine years, based on CoreLogic data:

The Big Question: Should You Renovate or Move? | Simplifying The Market

Odeta Kushi, First American's Deputy Chief Economist, calculates the amount of equity homeowners have lately gained:

"Keep in mind that American households own nearly $35 trillion in owner-occupied real estate, just over $11 trillion in debt, and $24 trillion in equity." Inflation-adjusted terms, homeowners owned an average of $280,000 in equity in the second quarter, a record high.”

As a homeowner, you may have access to the funds you need to buy the perfect home or renovate your present one. However, delaying your decision could raise the expense of accessing that equity.

You'll need to refinance (or take out an equity loan) to access the equity if you decide to renovate. You'll still need to mortgage the difference between the down payment and the cost of your next property if you opt to move instead and use your equity as a down payment.

Over the next year, mortgage rates are expected to rise. If you wait to leverage your equity, you'll almost certainly end up paying more. According to the Federal Housing Finance Agency's (FHFA) most recent data, about 57 percent of current mortgage holders have a mortgage rate of 4% or less. If you're one of those homeowners, you may lower your mortgage rate to below 4% by taking action today. If you're one of the 43 percent of homeowners with a mortgage rate above 4%, you might be able to execute a cash-out refinance or buy a more costly property without boosting your monthly payment substantially.

First, figure out how much equity you have in your home.

If you're ready to either redesign your current home or find an existing or newly constructed property that meets all of your needs, the first step is to figure out how much equity you have in your current residence. You'll need two things to accomplish so:

  1. Your home's current mortgage balance
  2. Your home's current market value

Your mortgage balance is most likely listed on your monthly mortgage statement. You can pay several hundred dollars for an appraisal or call a local real estate specialist who will be able to provide you with a professional equity assessment report at no cost.


If the last 18 months have refocused your thoughts on what you want from your home, now is the moment to renovate or relocate.

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