Is a Home Remodel Possible in 2020? Here’s What to Know
The coronavirus pandemic continues to impact the housing market, including people’s home remodeling plans. In fact, data shows a decline in spending on improvements and repairs over the coming year.
It’s still possible to remodel your home, but expect the way you start and finish the project to differ from the status quo.
How much are average home remodeling costs?
The typical home remodel, which involves changing the style or structure of a home, ranges between $18,399 and $75,971, according to data from HomeAdvisor. The average cost to remodel a house is $46,786.
Below is a breakdown of the average cost to remodel a house based on its square footage.
|Square feet||Typical cost range||Average cost|
|1,000||$10,000 to $60,000||$19,000|
|1,500||$15,000 to $90,000||$37,500|
|2,000||$20,000 to $120,000||$50,000|
|2,500||$25,000 to $150,000||$62,000|
|3,000||$30,000 to $180,000||$75,000|
|4,000||$40,000 to $240,000||$100,000|
How the COVID-19 crisis is impacting home remodels
The remodeling industry was poised for growth before the coronavirus outbreak, though at a slower pace when compared with previous years. The Leading Indicator of Remodeling Activity (LIRA) predicted a 1.5% increase in spending for home improvements and repairs during 2020, and a 3.9% growth rate by the first quarter of 2021.
Most recently, the LIRA report, which comes from the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University, anticipated a decline in remodeling spending for the rest of 2020 and additional drops in 2021. These forecast changes are likely a direct reflection of the coronavirus pandemic and the shelter-in-place and social distancing guidelines that followed.
A National Association of Home Builders (NAHB) survey showed that an overwhelming majority of professional remodelers — 96% to be exact — are seeing a slowdown in the number of remodeling inquiries coming in due to the pandemic. Other ways remodelers said the COVID-19 outbreak is impacting their business activity include:
- Homeowners’ general willingness to remodel now: 93%
- Homeowners’ concerns about interacting with remodeling professionals: 86%
- The supply of N95 face masks: 84%
- The cancellation or delay of existing projects: 84%
“The phones stopped ringing for a little while, for some people, depending on what area (they’re) in,” said Tom Ashley, chairman of the NAHB Remodelers Council.
For example, in the state of Wyoming, which didn’t have an influx of COVID-19 cases, there wasn’t as much of a drop-off in remodeling activity, unlike the New Orleans metro area, where Ashley is based.
Can you still get a home improvement loan?
It’s still possible to get a home improvement loan to finance your remodeling project, but you may have limited options.
Some lenders are raising minimum credit score and down payment requirements for new mortgages. Others aren’t allowing current homeowners to tap their home equity for a home remodel or any other purpose.
Despite these setbacks, it’s worth exploring which lending avenues may still be available for remodeling your home, particularly if you have a strong credit profile and plenty of available equity to tap. Those options may include:
A cash-out refinance allows you to borrow a new mortgage for more than you currently owe, and take out the difference between your new and old loan amount in cash.
Home equity loan
A home equity loan is paid out in a lump sum against the equity you have in your home. You repay it in fixed-rate installments, similar to your mortgage, over a set number of years, usually five to 20 years.
Home equity line of credit (HELOC)
A home equity line of credit also allows you to tap your available home equity, but it’s a revolving credit line that works similar to a credit card. You only pay back what you withdraw, plus interest.
Fannie Mae HomeStyle® Renovation loan
You can purchase or refinance your home and roll in the cost to remodel your house with the Fannie Mae HomeStyle Renovation loan.
Freddie Mac CHOICERenovation® loan
Similar to Fannie Mae’s product, the Freddie Mac CHOICERenovation loan allows you to buy or refinance a home and complete a home remodel using just one mortgage.
FHA 203(k) loan
The 203(k) loan backed by the Federal Housing Administration is ideal for homebuyers and existing homeowners who want to make home improvements but have less-than-ideal credit. You can finance your purchase or refinance and home renovation costs with a single loan.
Using an unsecured personal loan is likely the most expensive option to finance a home remodel, since interest rates are usually higher than those on home loans. The upside is that a personal loan doesn’t use your home as collateral, so you won’t risk losing it to foreclosure if you fail to repay it.
Should you try remodeling your home in 2020?
If you have the budget and financing lined up, now would be a good time to get started on a home remodel, NAHB’s Ashley said.
“With the reduced call log for some remodelers, it would probably be the best, most opportune time,” he said.
Expect the project process to look a little different, though. Ashley advises getting comfortable with fewer in-person meetings, for example.
But even if you’re not ready to jump in just yet, it’s wise to map out your plan so you have everything in place once you’re ready to move forward.
4 tips to prepare for a home remodel
1. Gather multiple quotesTake the time to make phone calls or fill out online inquiry forms with three or more companies to get home remodeling cost quotes. You want to find your best deal at the best quality.
2. Apply for financing now More borrowers are taking advantage of today’s record-low mortgage rates, which means lenders are even busier. The longer you wait to apply for a loan to finance your home remodel, the longer it will take you to qualify for and receive those funds.
3. Vet your contractors Before you sign any documents or send any money, do research on the people you plan to hire. Make sure they’re licensed and insured, and ask for references as well as examples of their past home remodeling projects.
4. Practice extra safety precautionsFor the safety of you, your loved ones and the contractors, ask that the contractors and subcontractors wear protective equipment, including masks and gloves. They should also practice social distancing while in and around your home.