Making good financial decisions for your home in 2024

As you plan your spending and saving routine for 2024, you probably have loads of questions. Are interest rates going up? Could the housing market crash? Is inflation finally easing? Those answers are out of your control, but there is one area where you hold the power: your home.

While 30-year mortgage rates do seem to stabilizing (staying around the 7 percent mark), the reality is that the majority of homeowners have home loans that are significantly cheaper than those on offer today – meaning there are a lot of reasons to stay put instead of selling and buying a new place. In fact, the most recent “State of Home Spending” report from Angi, the contractor search site, revealed that 40 percent of homeowners took on more home improvement projects last year because current mortgage rates made moving or purchasing a home less feasible.

If you’re planning to have the same roof over your head for the foreseeable future, now is the time to make sure your house feels like home. Here’s how to make some good financial decisions in 2024.

Is now a good time to improve the value of your home?

If you’re looking to find the materials to make your home look better, there is news worth celebrating in 2024: The rise in the costs of those goods is normalizing. While the headlines of 2021 and 2022 featured stories of insane price tags for lumber and impossible-to-find products like windows and doors, the supply chain is looking much better these days. According to data from the National Association of Home Builders, average prices for residential construction supplies rose just 1.3 percent in 2023 – a sizable drop from the 15 percent growth in 2022.

That leveling off of prices is good news for the full year, but Mallory Micetich, home care expert at Angi, says that the early bird has the potential to score big when it comes to actually finding workers for the job. There is a massive shortage of construction workers in the country – more than half a million, according to research from the Associated Builders and Contractors – which means that homeowners stand to benefit from starting projects in off-peak periods.

“The long, sunny days are ideal for taking care of big projects, but the high demand means it can be harder to find available contractors,” Micetich says. “Additionally, building materials can cost more during the peak season as demand for these products increases. If you can get a head start on a project ahead of the start of home renovation season in May, you are likely to have more success finding and hiring your top choice of contractor or home pro and could see benefits in terms of budget and timeline.”

If you aren’t quite ready to break ground on a project, there’s nothing stopping you from shopping. Keep an eye out for potential discounts/closeout-sales on furniture, flooring and appliances you might need to stockpile for later in the year. It’s particularly smart to think out-of-season: Not too many people are worrying about air conditioning in winter, so there might be bargains in buying a new unit or upgrading your HVAC system.

The long, sunny days are ideal for taking care of big projects, but the high demand means it can be harder to find available contractors.

— Mallory Micetich Home Care Expert at Angi

What to know about tapping home equity

If you’re thinking about tapping your home equity, the first lesson you need to understand is the potential risk involved: You’re putting your home on the line to borrow the money — as with a mortgage, it serves as collateral for the debt. Default, and you’re at risk of foreclosure.

However, due to that risk, home equity loans and home equity lines of credit (HELOCs) both offer some of the lowest interest rates available (among consumer loans, anyway). Lenders know you want to keep your home, so they’re willing to let you borrow against it at a more favorable rate than those of Admittedly, borrowing costs on HELOCs and home equity loans have increased in line with other interest rates in the last year: Hovering around nine percent, they’re no longer the cheap financing they once were. Still, they beat the double-digit rates of unsecured debt, like credit cards and personal loans, and the forecast is for them to recede throughout the coming year.

Plus, if you’re using the funds from a home equity loan or a HELOC to improve or repair your home, you’ll score some tax benefits with the ability to deduct the interest on your return – a key selling point versus using a credit card to pay for your project. It’s one of the reasons that home renovations and remodels tend to be, by far, the most common use of home equity-product funds.

Bear in mind that HELOCs and home equity loans are best-suited for big projects: $10,000 is often the bare minimum lenders require you to borrow, and many set the bar as high as $30,000. Small wonder that, in Angi’s “State of Home Spending” survey found that when it came to investing in long-term major home projects, nearly 24 percent of homeowners were planning to finance them with a HELOC.

Other ways to pay for home improvements

You don’t have to take out a home equity loan to cover the costs of a home project. Consider these other ways to secure the cash you need:

• Credit cards with a zero interest introductory offer: If you need a smaller amount of buying power and have a clearly defined strategy for paying back your costs in a short timeframe, there are plenty of credit cards with lengthy 0% APR periods. Interest-free funding! You won’t pay any additional finance charges as long as you pay off your balance in full prior to the end of the introductory timeframe, generally a year or two.
• Personal loans: Personal loans are another option to consider, and you won’t have to put your house on the line to secure one. However, you’ll want to have excellent credit; otherwise, personal loan rates can be excessively high, adding to the overall cost of your project.
• Savings: Avoid any interest charges or worries about an application by dipping into your savings to upgrade your home. According to Angi’s most recent “State of Home Spending” survey, 46 percent of homeowners used savings account money to fund projects. Just be mindful of keeping enough money in your savings for an emergency fund. If you drain your savings, you’ll have a nice place to call home, but you’ll be house poor — that is, you won’t be able to enjoy it due to the financial stress of a nearly-empty bank account.

Not all home improvements need to be expensive

If you’re planning to live in your home forever, you might not be worried about how much you’re going to spend to get things exactly as you want. However, if you plan to sell the home down the road, it’s important to remember that most home improvements don’t manage to recoup their full costs at resale.

“While remodeling a kitchen, updating a bathroom, or finishing a basement can be great ways to increase the value of your home, there are lots of smaller projects you can do that also have a great ROI,” Micetich says.

Be mindful of thinking about projects that can help increase the value of your home without breaking the bank. The first three, in particular, are great for curb appeal.

• A new garage door: Micetich points out that a new garage door will only cost between $750 and $1,600, and you’ll get most of that money back – 102.7 percent, to be exact – when you sell your home. “ROI isn’t the only reason to replace a garage door, as modern doors offer increased durability, a longer lifespan, and superior protection against severe weather events,” she says.
• A new front door: The entrance is everything, but it doesn’t cost much. Micetich says a new front door will typically cost between $500 and $1,500 and return around 65 percent of its value. “To maximize this ROI,” she advises, “go with a door that is both aesthetically pleasing and exceptionally durable.”
• New windows: Depending on the kind of windows you choose, you can spend as little as $200 per window of $1,300, according to Micetich – an amount that can add up if you have a lot of windows to replace. “For that price, however, you’ll get around a 65 percent return on investment, improved energy efficiency, and some added visual updates on both the interior and exterior of your home,” she says. This figure includes both wood and vinyl frame replacements.
• Sprucing up your living room: Micetich says that taking steps to focus on the central gathering place in your home can deliver a typical return of 53 percent. “Completing many projects simultaneously, such as adding an accent wall, replacing the wallpaper and repainting the ceilings have a cumulative effect on this ROI,” she says. “Even tiny projects like adding slipcovers, updating the lighting, and decluttering the space have an impact when dealing with prospective buyers.”

In addition to thinking about ways to make your home better in 2024, don’t forget to focus on something more basic: Its condition. Maintenance is a hugely important part of being a homeowner, but oftentimes, it’s ignored — leading to issues that can break the bank or bust the budget.

Because routine repairs and upkeep can improve the longevity of your home, Micetich recommends setting aside some money for maintenance costs so you can keep your home in good condition. Angi’s data shows that the typical homeowner spent more than $2,450 on standard maintenance like lawn care and gutter cleaning last year.

The most affordable home projects with strong ROI

These figures demonstrate an essential lesson for any homeowner to understand before breaking ground on any type of project: The cost spent on a renovation doesn’t necessarily correlate to return on investment/improvement in home value. Interestingly, the less one spends, the better the ROI sometimes. For example, Remodeling’s “2023 Cost vs. Value Report” notes that a major kitchen remodel that costs nearly $80,000 only returns only 42 percent, while a minor $27,000 one had a 86 percent ROI.

No matter what you decide to do to upgrade your home, Micetich recommends making decisions based on broad appeal. “Be mindful that if you are taking on a project for ROI, it is key to avoid hyper-personalization,” she says, “especially in material and design choices.”

Challenges of home remodels

While a big renovation might have you dreaming about what your home will look like when it’s done, make sure you consider all the potential headaches, frustrations and costs that can arise between now and then. According to the 2023 Houzz & Home Study, 27 percent of homeowners faced trouble staying on budget. As you plan for your project, it’s important to recognize that buying supplies and paying your contractor aren’t the only cost considerations. From securing permits to finding a short-term rental if the property isn’t habitable during the renovation, there are plenty of hidden expenses that can create some additional challenges Some 21 percent of homeowners had issues staying on schedule with their project. That extended timeline can lead to higher costs — not to mention the higher pain of asking your in-laws if you can stay for another month.