Why Fixer-Upper Homes Are So Unpopular Now
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Here's your money briefing for Thursday, June 29th. I'm J.R. Whalen for The Wall Street Journal. Traditionally, fixer-upper homes have given buyers an opportunity to save some money on the cost of the house and remodel and renovate to their liking. But in today's housing market, almost nobody wants them.
You've got higher construction loan costs. You've got higher mortgage rates. You've also got high property taxes, higher property prices. All of these things are pressuring buyers' wallets.
We'll talk to Wall Street Journal personal finance reporter Veronica Dagger after the break.
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Prospective homebuyers already facing limited choices in a tight market are turning away from so-called fixer uppers. Wall Street Journal personal finance reporter Veronica Dagger joins us. So, Veronica, people have been buying fixer upper homes for decades. There are even TV shows about them. Why are they falling out of favor with buyers now?
Well, one of the reasons is they just don't want to hire a contractor. It's a lot of work to do that, and it's hard to find them these days. But the big factor here is high mortgage rates. So buyers are already spending a ton of money to get that mortgage. They're spending a ton of money to buy the house.
Why are fixer-upper homes becoming unpopular with buyers now?
Some of these houses they're paying a lot for aren't in the best condition, but they're still buying them anyway. So if you're already forking out a ton up front, there's not a whole lot in your budget left for something like a renovation.
Yeah, like you said, it's a lot of work. It's not like just walking in and, hey, it's a new home.
Right, exactly. Yeah, there's so much to do. You have to find the right contractor. If you're working remotely, I mean, that's something to think about, too. Do you want a construction site made out of your home? Anyone who's had work done knows how difficult it is to get contractors sometimes to commit to certain timelines and certain costs. So that is discouraging people as well. What this means right now is that people in general are backing away from buying these homes and are looking for more of a turnkey home experience.
Let's talk a little bit more about interest rates. You mentioned that a moment ago. How are they affecting fixer uppers on the market?
So fixer uppers are already less favorable for buyers these days because not only you've got your high interest rate on your home loan, your mortgage rate is higher than people paid about a year ago. But also, typically, when you renovate a house, you need to take a construction loan. And the rates on those loans have also increased. So you've got higher construction loan costs. You've got higher mortgage rates. You've also got high property taxes, higher property prices. All of these things are pressuring buyers' wallets, not to mention you still have inflation in other parts of your budget. Depending on what sector you work in, you may be worried about your job. So there's just so much pressure on buyers right now.
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