SHOULD YOU REMODEL DURING COVID-19?
The short answer in my opinion is: NO! Here’s why:
Even in a great economy, most remodels do not achieve a dollar for dollar return on their investment. In fact, many home updates may not give your home any additional value in an appraisal. But rather explain the nuances of cost versus value, let’s dive into why this is a bad time to do any remodels on your home. It’s grim. By now you have been bombarded daily by all types of Covid-19 news. The economy is on shaky grounds, like a boxer stumbling on the ropes, hoping to get a break from the incessant pounding. Current national unemployment rates are close to 20% - the highest ever since the Great Depression when it exceeded 25%. But in 1921 there were 122 million people living in the U.S. with about three times that amount today at approx. 331 million. So, the sheer number of unemployed is staggering.
Large companies have been failing recently, and many of these have been around for 100 years or more. Companies like JC Penney, Gold’s Gym, Frontier Communications, IntelSat, J. Crew, Neiman Marcus, Stage Stores, True Religion Apparel, Ultra Petroleum, Virgin Australia Airlines, Whiting Petroluem, Chesapeake Energy, Hertz car rentals, Lord & Taylor, Dillards, Kohl’s, Levi Strauss, Macy’s, Nordstrom, Signet (Kay Jewelers, Zales, and Jared’s) have all filed for bankruptcy protection or their credit downgraded by Wall Street. Then there’s the thousands of small businesses, restaurants, boutiques, and more that have been closed in accordance with State and Federal mandates on the Covid-19 pandemic but might not be able to survive or bring back their former employees.
The short or long effects on the real estate market are not yet apparent but it doesn’t take rocket science to see that large unemployment will mean more foreclosures, pressure for prices to fall in order to get out of a mortgage, and overall market values to erode as a result.
Property days on market has increased in my market area of North Texas, with prices stable and in some areas declining already. This is not a time to make major remodels. If your home needs repairs, you should absolutely consider it. However, in my opinion this will not be a great time to make updates or remodels hoping to increase value. We will need to wait this one out, and see how the economy recovers through the summer and beyond. If you are concerned about your home value, give me a call or email me, for a no BS appraisal of your home.