Although the Davis family of east Goshen, Pa., and the Fikes of Philadelphia live 30 miles apart and in different kinds of houses and neighborhoods, they have an important thing in common:
The need for more living space.
The Fikes, who have lived in their 12-foot-wide rowhouse for 21 years, have been able, by periodic rearrangement and innovative renovation, to accommodate changes in lifestyle without having to buy a new home.
The Davises would like to do the same. But while their spacious lot can handle the kinds of additions to their stone ranch house necessary for a family of four with two in diapers, they could use the same money and buy a house that would more than meet their needs.
To remodel or to buy: That is today’s real estate question.
There are several good financial reasons for doing one or the other. On the buying side, interest rates are below 7 percent for a 30-year mortgage and under 5 percent for adjustables. That’s a percentage point lower than they were last year. But buying also involves closing costs, which are about 7 percent of the sale price, and moving, not to mention selling your old home.
If you go the renovation route and over-improve, you’ll probably not be able to recoup your investment: If you live in an area where all the houses have three bedrooms and you have five, resale may be difficult.
If you need a home-improvement loan, and the interest rate is higher than if you took out a mortgage on a new house, you may be wasting money.
However, financial considerations often don’t hold a candle to the emotional attachment homeowners have to their homes. And emotion appears to be playing a large part in the decision-making process for both the Davises and the Fikes.
“Even though we have contacted a real estate agent, we are still hemming and hawing over the issue,” said Jeff Davis, a regional sales manager for a building-products manufacturer.
“Last weekend, my wife, Kathryn, asked me to sit in a chair and picture us selling this house, and I found myself unable to imagine pulling out of my driveway for the last time.”
They’ve lived in the house for just three years, and already love it enough, because of its large lot and rural character, to have agonized over a final decision. But they have two babies, three bedrooms and only 1 1/2 baths, and their “live-in nanny” has to live at the next-door neighbor’s.
Something has got to give.
Even Lane and Denise Fike, who have moved heaven and earth to stay in their five-room house as sons Hunter, 15, and Tyler, 12, have added height and weight, have thought about finding something larger, as recently as last spring.
“All I wanted was two other rooms–a dining room and a bathroom–and we would have had to spend $150,000-plus” to buy a new house, said Denise Fike, an artist and wallpaper designer.
Because the Fikes don’t want to leave Philadelphia’s Center City, they looked only in Queen Village and in pricey Society Hill, the latter “because we were dreaming that day.”
Lane Fike, an engineer with the city of Philadelphia, is required to live in the city, and the search was limited to “Center City, because it offers cultural and social opportunities within walking distance,” Denise Fike said.
They bought their first car two years ago, when Hunter started his freshman year at Penn Charter School, Denise said. Tyler attends school a few blocks from home.
To accommodate growing sons and Lola, their 3-year-old great Dane, Denise Fike recently handed her studio space over to Hunter as a bedroom, while Tyler remains in the room the boys shared for 12 years. Denise has found studio space elsewhere in the neighborhood.
For the shared bedroom, Lane Fike had bought two plain beds and built a frame around them, adding a fireman’s pole, a chin-up pole and a removable slide from the top bunk, with shelves and desk attached. Lane also created built-in drawers for the boys’ clothes.
Although the Fikes never thought they’d live in their house for so long, Jeff and Kathryn Davis had hoped to live in theirs for at least 30 years.
Then Marie arrived 20 months ago, followed by Nathan, four months ago.
“Things got very tight very quickly,” said Jeff Davis, who works from a basement office. Kathryn, a pediatric nurse-practitioner, commutes to work in Philadelphia.
Child care has presented a big challenge. The Davises were paying $670 a month to keep Marie in day care, and that figure would have almost doubled with Nathan.
“Instead, we hired a full-time nanny,” Jeff said. “But we have no place to put her, so she lives with our neighbors, who have a vacant nanny suite.”
Remodeling has worked for the Fikes. While Jeff Davis wishes it would work for his family, he feels buying a bigger house may be a better solution.
“Our house is worth roughly $200,000,” Jeff said. “If we sell it we could find something in an equally nice area in a good school district with four bedrooms for the same price, and it wouldn’t be 45 years old with things that will need to be replaced sooner instead of later.”
That doesn’t mean that the Davises haven’t tried to find a way to stay.
“We hired an architect, and we have six different scenarios of what we can do,” Jeff Davis said. “The place is so flexible, we could do anything.
“But looking at it as an investment, if we did a middle-of-the-road addition, and five years later, my company asked me to relocate, would five years be long enough to recoup that investment?”
Actually, the Davises can remodel or buy and be on safe financial ground either way. The minimum remodeling proposal is to remove the existing garage and add a family room and a new garage, at a total cost of about $20,000.
According to Remodeling magazine, just adding a 16-by-25-foot family room in the Philadelphia area typically costs $37,242. So the Davises’ estimate is a bargain and a half. And when they go to sell, they should be able to recoup about 70 percent of the cost of such an improvement, according to Remodeling.
They live in Chester County, which is a high-growth area. Because there is an influx of younger, more affluent people with families, three bedrooms may be a liability for a resale, but four bedrooms might fit the market better. So going for an addition that calls for another bedroom and a bath might be better.
They also don’t own the largest or nicest house in their neighborhood.
“Our house is in the lower quarter of prices for this area,” Davis said. “A mile down the road is a house that’s worth $1 million. Closer to us, there are Cape Cods that probably would bring $165,000.”
Still, with interest rates as low as they are, the economy sound, inflation low, consumer confidence high, prices stable and a buyer’s market, the Davises could buy much more house for the same money or even less.
While moving is a hassle and any real estate transaction involves angst, it would certainly be less disruptive than having carpenters and plumbers virtually living with you for months.
“We’re really looking at the economics of all this,” Jeff Davis said.
They also could fall just as much in love with their next house.
The Fikes are in an even better position than the Davises. They bought their house for less than $50,000 in February 1975 in an area where real estate prices skyrocketed through the 1980s.
Kathy Conway, an agent with Prudential Preferred Properties said period houses in Philadelphia such as the Fikes’ are very much in demand. All three floors are made of random oak planks, which are extremely expensive. And the feeling evoked by the style of construction offers continuity with the past despite the renovations.
