As some building material and labor costs have come down or stabilized, combined with many sellers acknowledging that a 10 year old home is no longer 'mint' and able to command premium pricing, combined with some growing inventory in areas, the renovator buyer is returning (if they have the cash or access to capital at decent rates.

A massive 12,000sf Gilded Age Mansion on the Upper East Side that was last asking $20 million is about to be marketed again following a renovation estimated to cost approx $20 million (I know that sounds crazy in many parts, but this sort of property commands a very costly, high end renovation!). The next buyer will thus spend around $40 million in total. A similarly sized mansion, fully renovated, although not brand new, just came to market for $50 million. This extreme example highlights the potential upside renovators are beginning to see. And no, this does not simply apply to mega-mansions! Those with imagination are seeing opportunities everywhere and at all price levels.

Many buyers who buy recently renovated or built homes tend to pay a premium price, and for many it is worth it as a renovation takes lots of time and energy, aside from the cost. However, many tend to change things and add even more cost, regardless of how new the property may be. Some attach great value in getting exactly what they want by renovating themselves. And now there is renewed potential for upside.

What will homes cost 2-3 years from now? This is partially a guessing game, and it varies considerably by location and property type. In under-supplied high demand areas, one could bet they will be at least 5-7% more expensive - or more - than they are today, based on a 2% inflation rate. A conservative renovation budget that delivers everything you really, really want, brand new, with potential valuation upside is a wonderful alternative for buyers today with limited options.