If you can't sell, maybe you can remodel
Americans who can afford it are making improvements to turn their old home into the home they would like to have. But be careful with your cash.
Many American homeowners are trapped in homes that aren't ideal for their situations.
But credit issues, underwater mortgages, job insecurity and more are adding up to make selling your old house and buying a new one much more unlikely than in normal times.
Homeowners who can't go out and buy the house they want are taking steps to create it instead.
According to the Joint Center for Housing Studies at Harvard University, Americans spent $115.9 billion on remodeling in the year ended in June. That reflected a 4.6% jump from the year ended in March and was the largest increase in more than five years.
The number of residential remodeling permits sought by homeowners was up 24% in July compared with July 2010, according to BuildFax.
If you're one of the lucky homeowners who can afford to remodel and add features to your home, SmartMoney has put together some advice on how to use your remodeling budget.
The first piece of advice, of course, is to make sure you can afford the renovations and repairs you plan to make. You don't want to drain your savings to pay for a pricy kitchen remodel only to lose your job the next month and be forced to sell because you can no longer make payments.
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Here are three more tips from SmartMoney:
- Understand that you won't get your money back when you sell. Few improvements pay for themselves in an increased sale price, especially now. In 2005, homeowners recouped 85% of their remodeling costs, but that's down to 60% now, according to figures from Remodeling Magazine.
- Pay cash. We have all learned what happens when you use your home equity as a bank.
- Consider cheaper alternatives. Can you reface your kitchen cabinets or replace the doors rather than get new cabinets? Can you choose less expensive appliances?
While some of the remodeling numbers look good, the Joint Center's Leading Indicator of Remodeling Activity is reflecting the economic struggles of homeowners. The center predicts remodeling will remain "volatile and weak" through the next few quarters.
"What looked to be a promising upturn in home-improvement spending earlier this year has begun to stall," Kermit Baker, director of the Remodeling Futures Program at the Joint Center, said in a news release. "Housing starts, existing home sales and house prices have all been disappointing lately, which has dimmed prospects for home-improvement spending gains this year."
another piece of advice-totally finish one project before starting another- otherwise you end up with a whole house torn apart and nothing ever really gets finished- been there- done that-
my alcoholic husband took our whole house apart back in the early 90's to remodel it- he was a contractor and had the know how to do it- in the middle of it , he dropped dead and i have been stuck with the mess ever since, trying to pay others a dab here and there to do small areas at a time- in my heart i know it will never be finished - living on social security does not allow a senior citizen enough money to have professionals to come in a do all that needs to be done to make it sellable-
for 7 yeras i went without a kitchen- it had been gutted- i had no way to cook- it still is not totally finished but at least i do now have a stove and counter tops- the sad part is , no one cared or offered to help other than the donation of a kitchen stove from my son- have an end in sight before you take things apart- -
I agree with Southern Homebuilder. I bought my 3BR ranch "starter home" in 1983 with the expectation of upgrading later. However, life's circustances kept me here and now, in today's market I have given the situation a LOT of thought and research and have come to the decision to make this exactly the home I want. All I need is a bigger aera for family gatherings/parties which can be achieved a room addition or by eliminating a BR. As a construction/building maintenance worker all my life Ican do alot of this work myself. This is still a very good neighborhood and as the years are creeping up on me, I know I don't need a bigger home or yard to maintain.
Tips from a builder:
1. DO NOT remodel thinking it is an investment and worrying about your 'return'. It is YOUR home. If you need to remodel it, do the work with the understanding that it is for YOU, not someone else. You have no guarantee that anyone else will like what you do anyway, so why try to please anyone that doesn't live in your house?
2. DON'T 'consider cheaper alternatives' unless that is what YOU want. There is nothing worse than finishing your remodel and then wishing you had spent the little bit extra for what you really wanted. You are already spending a lot of money to remodel your home. Don't save a dime, then spend a dollar redoing it the way you really wanted. Or worse, spend a lot of money and then end up living with something that isn't what you want.
3. KNOW what YOU want BEFORE you start.
In other words, ignore the money experts and do what is going to make YOU happy. They don't live there, you do.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.