"All these tarps over the construction came loose, and we were up there trying to pound nails at 3 a.m. to keep them from blowing away," Cook said. "My poor wife. And the neighbors . . . "
That wasn't the only nightmare the Cooks faced in the year-long transformation of a 900-square foot beach bungalow into a 2,600-square foot home. The ongoing hassles, the unexpected expenses, the now-you-see-them-now-you-don't workmen -- all have left Cook with little question about whether remodeling or moving is better.
"It's like asking if you should poke yourself in the eye or go on a cruise," Cook said. While he likes the end result, "I wouldn't do it again."
Americans love (or say they love) to remodelThere are, of course, plenty of people who are happy with their renovations, and remodeling is certainly a thriving business. Americans spent $233 billion last year fixing up their homes, according to Harvard University's Joint Center for Housing Studies, and the boom shows no signs of slowing.
For many people, though, moving is the simpler, less expensive and certainly less stressful option.
At first glance, there seem to be plenty of cost advantages to staying put and renovating. If home prices are accelerating rapidly in your area, you may be able to add on for less than it would cost you to buy a bigger home.
You also avoid the considerable costs of selling your home, buying a new one and moving, which can drain away 10% or more of the value of your home each time you change abodes.
Does buying and staying really pay off?In fact, the conventional wisdom about building wealth is that the fewer times you move in your lifetime, the better.
Let's say you have two homebuyers, each starting out with a $100,000 home. The first buyer stays put for 30 years, while the second moves up to a bigger, more expensive house every 10 years.
As you can see, the move-up buyer can wind up with a much more valuable home. But this buyer also paid more over the years in monthly mortgage payments, and he still has 20 years left on his final loan. Factor in those two things, and the buy-and-hold homeowner seems to come out ahead.
|Who wins: The buy-and-hold owner or the move-up buyer?|
*Moving cost: $18,000; cost of new house: $250,000
**Moving cost: $45,000; cost of new house: $500,000
This example assumes each home is financed with a 6% 30-year loan and that all homes appreciate by 6% a year. Any equity, minus selling and moving costs, is applied to the next house.
Our example doesn't factor in the higher utility, insurance and property tax payments our move-up buyer would have to make. And our buy-and-holder might be even further ahead if she invested an amount equal to the difference between the mortgage payments she was making and those she would have made on a more expensive house.
Some expenses this equation doesn't consider, though, are the costs of maintenance, repairs and updates. These are far more than most homeowners realize.
The high cost of keeping up with the JonesesIn fact, a study commissioned by the Wall Street Journal in 1998 found that the price of keeping a typical home up to current standards over a 30-year period is almost four times the home's purchase price.
If our buy-and-holder wasn't a committed do-it-yourselfer, she might be no better off than had she rented all those years. The cost of repair and renovation bills as she dealt with failing household systems could easily overwhelm her profit.
Meanwhile, our move-up buyer could be leagues ahead if he snagged a new or fully remodeled house each time.
Obviously, though, the choice between moving and remodeling involves a lot more than money. You may be deeply attached to your current house. Or maybe you love the neighborhood but can't find a better house nearby that you can afford. Or perhaps, like Thomas Jefferson and the addled widow of Winchester Mystery House fame, you simply can't stop yourself from putting your stamp on a house.
If that's the case, you still need a few reality checks. The first is that money spent on a remodel really isn't an investment -- it's consumption.