Is now the time to make home improvements?
Maryalene LaPonsie | Improvement Center Columnist | March 31, 2014
In 2006, housing prices fell 1.7 percent from the previous year. It marked the first time in 11 years that housing prices had seen a decline and was just the start of what would be an unprecedented drop in the housing market. In the years that followed, Americans would lose more than $7 trillion in home equity.
With homes bleeding equity, it's hardly surprising home improvement projects took a hit during the Great Recession. According to the National Association of Home Builders, the Remodeling Market Index - a measure of the nation's remodeling activity - hit a low of 25 during the fourth quarter of 2008. For comparison, the index was 41 during the same quarter in 2007.
However, all that is changing. The housing market is on the rise, and it looks like now may be the time to finally complete the kitchen remodel you've been putting off for years.
3 reasons for a remodeling resurgence
If you are one of the homeowners who put remodeling on the backburner during the Great Recession, here are three reasons to pull out those plans and call a contractor.
- The housing market is on the rebound. No one wants to pour money into a house and never recoup the cost. Fortunately, the market seems to have stabilized, and home values are once again on the rise. Property prices went up 13.4 percent from December 2012 to December 2013 according to the S&P/Case-Shiller Home Price Index. That means now is a good time to make improvements that can further boost your equity and potential resale value.
- Costs are holding steady while value is rising. While the value of the housing market is going up, the cost of remodeling projects seems to be holding steady for now. The annual Cost vs. Value Report issued by Remodeling Magazine found the cost of home remodeling projects peaked in 2009 before coming down in the years that followed. However, 2014 saw a very slight increase in remodeling costs from last year and may indicate prices are on the rise. Best to squeeze in your project now in case this is the start of an upward trend in remodeling costs.
- Interest rates are still low. Finally, interest rates may not be at historic lows anymore, but they are still good. As of this writing, many lenders are still offering home equity loans with rates lower than five percent. Homeowners who find themselves with newfound equity as a result of rising housing prices may want to take advantage of the lower rates while they can.
Projects to boost your home's value
Not all remodeling projects are created equal. While some can significantly increase the value of a home, don't expect to make much of your money back on others. For example, a home office remodel may set you back an average of $28,000, but your home's value will appreciate by less than half that amount as a result.
For midrange projects, Remodeling Magazine's 2014 Cost vs. Value Report found the following improvements provide the best return on investment. The percentages reflect how much of the project cost you recoup in terms of the increase to your home's value.
- Steel entry door replacement: 96.6 percent
- Wooden deck addition: 87.4 percent
- Attic bedroom: 84.3 percent
- Garage door replacement: 83.7 percent
- Minor kitchen remodel: 82.7 percent
ROI only one factor in remodeling
While a great return on investment can be an important factor when deciding whether to do a kitchen remodel or buy a replacement door, it isn't necessarily the only consideration for homeowners.
Some design experts have noted 2013 saw a trend toward remodeling with an eye on personal tastes and needs rather than resale value. One after-effect of the housing bubble burst appears to be that families are staying in their homes longer. As a result, homeowners may be less concerned with having a house they can sell and more focused on creating one they will love.