Over the last year, we’ve seen a shift in what buyers are looking for in a home. Recently, the American Institute of Architects released their AIA Home Design Trends Survey results for Q3 2021. The survey showed that 70% of respondents want more outdoor living space, 69% of respondents want a home office (48% wanted multiple offices), 46% of respondents want a multi-function room/flexible space, 42% of respondents want an au pair/in-law suite and 39% of respondents want an exercise room/yoga space.
If you’re a homeowner who wants to add any of the above, you have two options: renovate your current house or buy a home that already has the spaces you desire. The decision you make could be determined by a possible desire to relocate or the difference in the cost of a renovation versus a purchase, for example.
In either case, you’ll need access the down payment your next home would require or the funds for the renovation. Fortunately, the money you need probably already exists in your current home in the form of equity.
Home Equity Is On The Rise
The record-setting increases in home prices over the last two years has substantially improved homeowners’ equity.
Odeta Kushi, Deputy Chief Economist at First American explained,
“Remember U.S. households own nearly $35 trillion in owner-occupied real estate, just over $11 trillion in debt, and the remaining ~$24 trillion in equity. In inflation adjusted terms, homeowners in Q2 had an average of $280,000 in equity- a historic high.”
As a homeowner, the money you need to purchase the perfect home or renovate your current house may be readily available to you. However, waiting to make your decision may increase the cost of putting that equity to use.
Mortgage rates are forecast to increase over the next year, therefore, waiting to leverage your equity will probably mean you’ll pay more to do so. According to the latest data from the Federal Housing Finance Agency (FHFA), almost 57% of current mortgage holders have a mortgage rate of 4% or below. If you’re one of those homeowners, you can keep your mortgage rate under 4% by doing it now. If you’re one of the 43% of homeowners with a mortgage rate over 4%, you may be able to do a cash-out refinance or buy a more expensive home without significantly increasing your monthly payment.
If you’re ready to either redesign your current house or find an existing or newly constructed home that has everything you want, the first thing you need to do is determine how much equity you have in your current home. Contact a local real estate professional who will be able to assist you.