Even as home values continue to drop, homeowners continue to improve their homes. Yet one more piece of data seems to suggest that homeowners are becoming more optimistic about the future.
The Residential BuildFax Remodeling Index, a residential building and permitting database tracking 4,000+ cities and counties throughout the country, rose 18% year-over-year in 2010. After fourteen straight months of increase it reached a peak of 103.8 in December 2010, the highest December number in the history of the index, which started in 2004.
The increase comes at a time when more and more homeowners are underwater, making the financing of remodeling projects more difficult. “We believe many of these homeowners are drawing on their savings or other forms of consumer credit, such as credit cards to pay for the remodeling,” said Bruce Hahn, President of the American Homeowners Foundation. “Anecdotal evidence that most homeowners are opting for less ambitious projects than in the past supports this view,” he added. Another factor may be barriers to other alternatives. “In many markets it is very difficult to sell your home. Even if you can sell your home, financing its replacement may be a challenge because mortgage lenders have substantially tightened borrower requirements. If moving up isn’t an option, improving your current home may be the next best alternative.”
Homeowners need to be careful when selecting remodeling contractors. In good times and bad, complaints about remodeling contractors are near the top of both the Better Business Bureau’s and the American Homeowners Foundation’s complaint list.
There are a number of steps you can take to reduce risk. You should check the contractor’s credentials- carefully. Are they licensed and insured for workers compensation, property and personal liability? If in doubt, ask to see their insurance certificate. Do they belong to the National Association of the Remodeling Industry, the National Association of Home Builders Remodelers Council, and/or any of the more specific trade associations in the remodeling sector? That’s a sign of commitment to the trade and to professionalism. Most also offer certification and/or management training and keep their members up to date on the latest products and techniques. Ask for recent references on similar jobs (employee and subcontractor turnover is often fairly high, so recent jobs are a reliable indicator of their current capability). Check their record with the Better Business Bureau while you’re at it.
If you can’t get references on a particular contractor you’re considering using, consider looking elsewhere. There’s probably a very good reason you can’t get a reference!
Real estate experts say now may be a better time than ever to invest in a home improvement or home remodel project to help boost your home value.
According to Remodeling magazine, at the height of the real estate bubble, homeowners could expect to recoup 87 percent of their home improvement costs when selling, while the magazine estimates that a homeowner can currently only recoup 60 percent of their investment. Still, a good time for a home remodel is now.
A home equity line of credit is an excellent start to a home remodel, thanks to historically low interest on mortgage rates. For qualified homeowners, who would not be jeopardizing their savings or equity, it makes sense to invest in their home, especially if they plan on living there five years or longer.
The construction industry is still rebounding, despite some improvement from last year so as a result, home improvement contractors have discounted their rates, saving homeowners money. As an added bonus, the costs of materials like plywood, lumber and drywall has also come down.
A good first home improvement might be installing energy-saving appliances, as well as windows and insulation. The savings on your energy bill won’t entirely pay for the home improvement, but it will save you some cash year after year.
It might also be a good time to update your home and bring it up to date with other homes in the area. If you’re planning on staying in your home, a home remodel or small home improvement project will help you enjoy it all the more. Home remodeling experts say, while this is not the time to remodel just because you’re not necessarily thrilled with your kitchen, it is a perfect time to remodel an outmoded 1960s or 70s kitchen or bathroom.
Again, with mortgage rates bound to eventually go up, for qualified homeowners, it makes sense to refinance their homes now, or take out a home equity line of credit, and invest in the future.