Reconsider Renovation

July 8, 2021

As home building and renovation soared amid pandemic lockdowns, the price of lumber rocketed from around $400 per thousand board feet in February 2020 to an all-time high of over $1,600 in early May. The National Association of Homebuilders (NAHB) estimated that the rise in lumber prices had added over $36,000 to the cost of a new single-family home, as a result.

Additionally, despite the fact that mortgage rates continue to hover near historic lows, potential buyers have been confronted by low housing inventory and higher prices, an issue that shows no signs of letting up for first-time homebuyers.

Thankfully, lumber prices have since fallen. And it may be an ideal time to reconsider renovation.

Low inventory was an issue even before the pandemic, as homebuilders who were pummeled by the housing crisis were unable to match production levels to demand. Now, the supply shortage is weighing on the housing market even further amid increased competition.

However, renovation loans allow borrowers to purchase a home that needs repairs, or refinance their existing home and include the necessary funds for renovation in the balance of the new loan. These types of loans give borrowers the ability to finance costs for everything from small repairs and simple updates to large-scale renovations into one low-rate mortgage! There are also variety of renovation loan programs that allow you to base the loan amount on the “as-completed” value of the home, rather than the present value.

Freddie Mac’s CHOICERenovation®, for example, is incredibly flexible and can be used in a wide variety of scenarios. If a homeowner has an eye on a fixer-upper and wants to turn it into a dream home, it’s likely CHOICERenovation® can help make it happen.

The recent plunge in lumber prices, which have declined more than 40% from the record set in early May, may boost homebuilders’ sentiments about staying put in their home-sweet-home and renovating. Experts predict lumber prices will continue to slowly ease, settling at the $500 or $600 level by this fall, as mills add new shifts and find additional employees.

That’s great news for homeowners who are considering kicking off the renovation of their daydreams, as well as for home shoppers who are ready to reconsider purchasing a fixer upper.

With a comprehensive renovation loan catalog designed to address many financing situations, AFR can help you grow your business and bring more families home. Learn more about our Renovation Suite here:

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