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.
Two separate industry gauges released recently indicate that despite the ups and downs seen in monthly reports on home prices over the last year, residential property values ended 2010 relatively unchanged from 2009 levels.
Reports from both Integrated Asset Services (IAS) and CoreLogic point to level ground over the 12-month period, although consecutive month-to-month declines were the dominant pattern during the latter part of the year.
IAS says one hopeful sign for real estate arrived in a report from the private research group the Conference Board that showed consumer confidence in January climbed to its highest level in eight months as Americans became more optimistic about job prospects. Moreover, the share of people who said they intended to buy a home rose to 2.2 percent, the second consecutive gain after November’s 1.7 percent.
IAS stressed, however, that the burning question now is whether an improving consumer outlook will be offset by the drag from rising mortgage rates and the glut of distressed properties for sale. Many believe the enormous supply overhang of existing homes, particularly when considering all those in or soon to be in foreclosure, promises to keep pressure on prices for some time.
CoreLogic says it’s reading the data as “a sign that the largest declines are over,” considering the company recorded double-digit drops in residential property values in both 2008 and 2009.
Mark Fleming, CoreLogic’s chief economist, said “Despite the continued monthly decline in home prices and year-over-year depreciation, we’re encouraged that on an annual basis we’re unchanged relative to a year ago.”
Residential mortgage refinances are expected to deteriorate over the next two years due to factors not limited to rising interest rates. Some are predicting that mortgage refinancings, in fact, will fall by 77% by 2012 and drag down the overall market for originations.
Total refinances hit about $1 trillion in 2010 and accounted for 69% of the market share for originations, according to the Mortgage Bankers Association. The trade association is predicting that will drop more than two-thirds to just $352 billion and comprise of 36% market share in 2011.
MBA anticipates only $236 billion worth of refinances to take place in 2012.
Mortgage purchases will not make up for the losses in the refinance sector, according to the firm’s numbers. Purchase originations are expected to increase to $614 billion from $473 billion in 2011 (up 30%), bringing the total originations for the year to $966 billion.
In 2010, origination transactions summed $1.5 trillion, which means a nearly 36% drop in overall residential lending activity.
MBA Senior Vice President and Chief Economist Jay Brinkmann said rising mortgage rates will filter the market for refinances, and that repurchase requests from Fannie Mae, Freddie Mac and mortgage insurers will also impact the market.
Low mortgage rates and home prices helped fuel a sharp increase in home sales during the month of December, according to the National Association of Realtors.
The group says existing-home sales during the month took place at an annual rate of 5.28 million, which was up more than 12 percent from the previous month as analysts said the report was a good way to end the year.
“The December pace is near the volume we’re expecting for 2011, so the market is getting much closer to an adequate, sustainable level,” said Lawrence Yun, NAR chief economist. “The recovery will likely continue as job growth gains momentum and rising rents encourage more renters into ownership while exceptional affordability conditions remain.”
The rising pace of sales also helped drive down the nation’s housing inventory, which has been inflated for several months, dropping it from 9.5 months to 8.1 months. A balanced market, according to the group, has roughly a 6-month supply.
One of the biggest reasons for higher sales is that home prices have fallen significantly from the peak levels from the housing boom. According to the Case-Shiller home price index, home prices in October were roughly the same as they were in mid-2003.