Higher prices and soaring inflation is leading to major regret among homebuyers. It’s also leading to property and home neglect for even long-term homeowners.
That’s the takeaway from a new study by the home insurance group Hippo.
According to the 2022 Hippo Housepower Report, which surveyed over 1,000 U.S. homeowners, 2022 was a “year of growing economic and financial instability that took a toll on homeowners and their well-being.”
The study backs that up with some eye-opening data on just how rough the volatile economy has been on homeowners – new and old.
- Over half (52%) of homeowners with financial concerns are holding out on home improvements due to recession concerns.
- Nearly 40% of those with financial concerns delayed repairs after losing money in the crypto crash.
- 59% said they had something unexpected go wrong with their home in the past year.
- On average, homeowners spent nearly $6,000 on home repairs or maintenance this year, a $1,000 increase YoY.
- Two-thirds (65%) of homeowners who experienced a problem with their homes in the past year said that it could’ve been prevented with regular maintenance.
- A majority (78%) of U.S. homeowners have had regrets about their home purchase in the past year.
- Many homeowners said that knowing what they know today, they would’ve bought a different home (64%) or waited longer to buy (63%).
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A Tough Year for Homebuyers
A decent argument can be made that recent homebuyers had it worse than long-term homeowners. The core truth is 2022 has been hard on both.
“2022 was a hard year for owners and buyers for a few different reasons,” said Sotheby's International realtor Maureen McDermut. “The main reason has been the Federal Reserve's efforts to combat inflation by raising interest rates.”
Rising interest rates have pushed many buyers out of the market, which has made sellers reduce their asking price.
“For buyers, the increases in interest rates means that they are now paying more for the home they want to buy than they would have even six months prior,” McDermut said.
McDermut’s clients say they feel “stressed” by overpaying for a home or not completing repairs necessary.
“It boils down to the significant shift in the market,” she noted. “A year ago, sellers were not feeling the stress of completing repairs, as buyers were hungry for homes and would take on the cost of the repairs themselves. Now, these are factoring into negotiations again, causing difficulties for both parties.”
Higher prices across the board on home-related issues have dealt new homebuyers and existing homeowners a significant financial blow.
“For buyers, overpaying for a home or falling short on home repairs can be very emotionally stressing,” said Lending Tree senior economist Jacob Channel. “This is especially true if you’re worried about making your mortgage payments and losing your house.”
Big money issues are often a major stressor for homebuyers and homeowners.
“After all, who wants to live in a home that’s in need of major, but unaffordable, renovations, or be under constant stress about missing too many payments and losing your house,?” Channel added.
As usual with major household finance issues, emotional stress can climb if things go south. That's especially the case when selling a home in a period of high economic volatility.
“If you’re willing to hold on to your home for a few years that shouldn't cause emotional stress,” said Eclipse Cottages chief executive officer Justin Draplin. “If you’re looking to sell your house quickly and get top dollar that's when the emotional stress rises. It just depends on how badly you want to move and hold on to your house.”
What Will 2023 Bring?
After a booming 2021, real estate activity quieted down in 2022. Now, can homeowners expect some stability in 2023?
“Homeowners should expect prices to continue to rise. Interest rates aren't coming down anytime soon,” Draplin said. “We started to see at the end of 2022 people looking to downsize.”
Other real estate professionals agree, noting there’s just too much turbulence in the residential real estate market right now for any real stability.
“We don’t see any real relief in 2023,” said Pacwest Funding CEO Joshua Massieh. “There might be scenarios where agents and lenders will slap lipstick on the current climate and say, "Hey, look, the seller is willing to pay for your closing costs, but that still won't really make a dent anywhere in the markets.“
Otherwise, home prices will likely stay flat while rates will fluctuate throughout the year. “We’ll see those rates touching record highs and then pull back to an even keel level,” Massieh added.
For homeowners who lack the cash for major home repairs/maintenance, some viable financial options are available.
“Often, the best way to keep your home in good shape is to be diligent about making repairs as they’re needed,” Channel said. “It’s usually much easier and cheaper to make small fixes over longer periods of time than to wait and let everything pile up.”
Additionally, putting money away each month in case a major expense arises is also a good idea.
“Unfortunately, if you are in a situation where you do need a major repair done, you may have to resort to credit to pay for it,” Channel said. “Home equity loans are often the best bet for those who need cash for major renovations, but other options like personal loans or even credit cards – while far from ideal – may be what homeowners have to rely on to keep their home safe.”
It's possible to find a better deal on an equity loan by comparing different lenders before you rush out to get on.
“Similarly, you may also be able to find a better deal on big expenses like roof repairs or new heating units if you shop around before buying, Channel said.
