About 1 in 5 Gen Zs (22%) say the lack of affordable starter homes is a barrier to homeownership, according to a new report, and some believe homes in need of renovation could be the solution to the problem.
A fixer-upper, as defined by Redfin, is an existing home that requires varying degrees of maintenance and is usually offered at a low purchase price.
More than half (57%) of Gen Z respondents said they would be willing to make an offer on a home in need of renovation, according to a new report from Clever Real Estate. The website surveyed 1,000 Gen Z adults ages 18 and older, 126 of whom were homeowners.
However, some who have gone down this route are already rethinking their decision. Of the 40% of Gen Z homeowners who bought a home in need of renovation, about 27% regret it, according to the report.
Given the small number of homeowners who responded to the survey, it's hard to say how regrets about buying a home in need of renovation might play out on a larger scale, but experts say it's not uncommon for buyers of such properties to feel overwhelmed.
“Many of them are first-time buyers. They don't realize how much it actually costs to own a home and don't realize that these renovations and repairs can be quite expensive,” says Jaime Dunaway-Seale, data writer at Clever Real Estate.
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Buying a home in need of renovation can mean savings in the short term, but potential buyers need to keep in mind renovation costs as well as the home's current functionality, says Marine Sargsyan, an economist at Houzz, a home renovation and design website. For example, if your new home doesn't have a usable bathroom, that could delay your move-in.
“Functionality is paramount. Everything you have in your home has to work,” she said. “If it doesn't, then look at how much it's going to cost you to replace it. [it].”
“Young buyers have to make compromises”
Since many Americans cannot afford to own a home, a home in need of renovation could mean short-term savings.
According to a May report from StorageCafe, which analyzed data from sister division Point2, the average cost of a home in need of renovation is about $283,000. That's about 29% less than a move-in-ready home, saving buyers about $117,000, StorageCafe found.
“Young buyers have to make compromises because real estate prices are so high,” says Susan Wachter, a professor of real estate and finance at the Wharton School at the University of Pennsylvania.
Some Gen Z buyers are even willing to buy homes that need renovation, are in poor condition, or have outdated features that pose major risks. More than half (56%) of Gen Z buyers in the Clever Real Estate survey said they would buy a home with asbestos, a mineral fiber that can increase the risk of lung disease when exposed.
When looking for homes to renovate, make sure the home is safe and habitable enough to avoid health and safety issues, Sargsyan explained.
“Make sure there are no toxins in the house,” she said.
It does not take extreme deterioration for a house in need of renovation to suffer significant Repair costs. Many of the existing homes in the U.S. were built decades ago, according to the U.S. Census Bureau's 2022 American Community Survey. The survey found that the average age of homes in the U.S. is about 40 years.
“Homebuyers have to make trade-offs along the way, and often that involves the age or condition of the home,” Jessica Lautz, deputy chief economist at the National Association of Realtors, recently told CNBC.
Functionality is paramount. Everything in your home must work.
Marine Sargsyan
Economist at Houzz, a home renovation and design website
According to the 2024 U.S. Houzz & Home Study, about 51% of homeowners surveyed spent $25,000 or more on home improvement projects in 2023, up from 44% in 2021. Houzz surveyed 33,830 homeowners ages 18 and older from January 19 to February 27.
While cash from savings remains (83%) the most common way homeowners finance renovation projects, credit card use has increased, Houzz found. About 37% of homeowners paid for their repair projects with credit cards, up from 28% in 2022.
Five things to look for in a house in need of renovation
If you're considering a home in need of renovation, ask the seller or real estate agent thorough questions about the property, such as when it was built, experts say. If you make it to the home inspection, hire a home inspector who can help you piece together the problems with the home.
Here are five important things to look for when considering buying a home in need of renovation:
- Roof: If the roof is leaking, you need to figure out how much the repair will cost, Sargsyan said. Roof repairs can be costly, and you also need to consider the damage the leaks may have caused to the home. According to Houzz, the average cost of roof repairs is about $12,000.
- Installation: Know the condition of the pipes and lines in the home, such as where they are located, where they go and when they were last replaced, Sargsyan said. Older pipes are more likely to break or crack if they were installed before 1980, when cast iron or clay were the common materials, according to Short Elliott Hendrickson, Inc., a construction company based in St. Paul, Minnesota.
- Electricity: Find out if your home's wiring is in good condition and when it was last updated. Older homes often don't have safety devices like GFCIs. Looking at the electrical panel can also give you clues about your home's wiring, according to Lippolis Electric Inc., an electrical contractor in Pawling, New York. The average cost to upgrade electrical systems rose from $1,800 in 2020 to $2,000 in 2023, Houzz found. “It's important to know the total capacity of your electrical system because you don't want to plug in too many devices and then cause a power outage yourself,” Sargsyan said. “That's also an important consideration.”
- Walls and stairs: Make sure the walls are secure, Sargsyan said. If there are cracks in the walls and ceilings, uneven floors and difficulty opening and closing doors, those could indicate underlying problems, according to Perma Pier, a foundation repair company in Texas. And if there are stairs in the home, make sure they are safe to walk on, Sargsyan said.
- Total area: Familiarize yourself with the entire lot the house is built on, she said. Look for clues that any problems with the house could be traced back to the surrounding property, such as signs that the basement is flooding or cracking. “Will there be a surprise if it rains too much, especially with the weather changes of the last few years?” she said.