The Fixer-Upper Discount (NYT)
It’s real, but be prepared for a protracted renovation project and uncertain future costs.
The frantic pandemic pace of the housing market in the United States may be slowing, but the shortage of available homes remains especially affordable ones.
What about a fixer-upper? According to a recent study by StorageCafe, in 36 of the 50 largest U.S. cities, fixer-uppers list for at least 25 percent less than a typical turnkey home; in nine of those cities, the discount tops 50 percent. Perhaps it’s time to cue up those “Property Brothers” reruns? (To identify “fixer-uppers,” analysts scanned StorageCafe’s real estate platform, Point2, for listings tagged as “TLC,” “good bones,” “as-is,” “need of repairs” and other such terms.)
Of course, a lower price is useless if it doesn’t make a home affordable. In Los Angeles, among the most expensive American cities, a typical fixer-upper comes with a $500,000 discount — the largest dollar amount among the 50 cities. Unfortunately, that only drops the average list price to $899,000 — still out of reach for many. Two other California cities, San Diego and San Francisco, offered the next-best discounts, each saving buyers at least $405,000 compared with a turnkey home in the area.
Detroit had the least expensive fixer-uppers, which list for 48 percent less than turnkey homes, or just $59,900. Milwaukee followed at $79,000, followed by Baltimore, at $107,500.
While a discount is great, buying a sagging property is only the beginning of the process. You still have to get the work done. You may be able to finance and plan renovations from the get-go, but projecting future costs can be tricky given the continuing shortages of materials and the shifting costs of labor.
But when it comes down to it, that fixer-upper could well cost more next year than it does this year, so snagging it now may be worth the renovation headaches ahead.
What Fixer-Uppers Cost
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