Renters are faced with high rent these days and want to own a house. As posted by the White House in September this year, rental prices as of July 2021 were 8.3 percent higher nationwide compared to the same time last year. Data from RealPage shows that this was the largest annual increase since it started monitoring rental prices.
Among the 150 largest cities of the country, 65 saw an annual rent increase of more than 10 percent. Because of this, 25 percent of renters or over 10 million people spend more than 50 percent of their income on rent alone. The recommended share of rent and utilities is 30 percent of one’s income. Almost half or 47 percent of renters spend much more than this. A total of 97 percent of renters are, therefore, barely getting along.
However, it is difficult to find a house within budget because house prices are high and there is a shortage of available homes. The Case-Shiller Index shows that from September 2020 to June 2021, house prices across the country increased year-over-year by seven to 19 percent. The rate of home price increases in 2020 was higher than the population’s income growth. The housing price-to-income ratio reached the highest level since 2006 at 4.4.
Data from Freddie Mac shows that the nationwide shortage of homes is nearly 3.8 million. Most of these are for entry-level homes because developers would rather build more expensive homes that are more profitable. Among all newly built homes, fewer than one in ten are starter homes.
The Fixer-Upper Option
This situation has created a movement among younger homebuyers to purchase cheaper old houses that are fixer-uppers. While the movement began long before the pandemic, it has gained even more interest these days. Most of the old houses for sale are often away from cities.
With most young people working from home during the pandemic and intending to work from home for good, this is no longer a problem. If the area has Wi-Fi, they can work from there. With Covid-19, people also prefer to live outside crowded cities and to have homes with more outdoor space.
If you belong to this group of house hunters, there are several things you need to check out when looking over an old house. Before committing, hire a professional house inspector to thoroughly assess the property. Choose someone who is experienced in inspecting old houses.
The basic structure of the house must be sound. This includes the foundation, basement, and weight-bearing walls. Any weaknesses in these parts will mean almost a total rebuild.
Have the roof, doors, and windows checked as well. You can easily have these replaced if necessary but take note of the cost.
Insulation, Asbestos, and Lead
Make sure your house inspector has the expertise to check for pollutants that are commonly present in old houses. If he is not an expert on this, hire a separate inspector for this purpose. Do not skip this because it is vital to your health.
Old houses often have no insulation or insufficient insulation. If this is the only problem, you can easily fix it later with spray foam insulation. Some old houses, however, have insulation that contains asbestos which can cause lung disease. If this is found, you will need to hire specialists to completely remove or encapsulate the asbestos.
Old houses built earlier than 1978 will most probably contain lead in the paint. You can hire a specialist to completely remove all old paint from the house. The other option is to paint over everything to seal the old paint in. In this case, however, you must leave the house and hire a lead specialist for any subsequent repairs that will disturb the new layer of paint and create dust from the lead underneath.
Plumbing, Gas, and Electrical Systems
Old houses often have problems with the plumbing, and their electrical systems are not up to par with current needs. Be ready for an overhaul of both systems.
Have the gas system thoroughly checked to ensure it is still working properly and does not need replacement. Any clogs or leaks can cause fire or release deadly carbon monoxide.
Once the house is safely and comfortably livable, changes that are for aesthetic preferences can start. At least, this can be done slowly, one project at a time. It is possible to first save up for each project before embarking on it. This can be a long-term work-in-progress that will slowly make the house truly reflect the homeowner’s personality.
Deciding on the Purchase
Make sure to tally the total cost of all immediately needed renovations to enable you to live in the house. You can get a loan that covers both the cost of the house and the immediate renovations, but you must find out if the amount you are qualified for is enough. Also, you must be able to afford the amortization. If all these check out, you are ready to find that charming old house you can make your own.