Remodeling in a down market
To remodel or not to remodel? It's a question that bedevils homeowners who don't have the answer staring them in the face, i.e. "might as well redo the master bathroom as long as we're fixing the flooding caused by the hole in the roof." Falling home values make the situation that much harder because many folks who might want to update their kitchen or build an addition don't have the equity to do it.
Thus renovations and maintenance work have taken a hit just like home sales. As Lorraine Mirabella reported in a Sunday story about the remodeling business:
Residential permits for alterations, additions and repairs have plummeted 27 percent in metro Baltimore this year through August, compared with the corresponding period in 2008, according to statistics from the Baltimore Metropolitan Council. The number of permits issued through August - 4,552 - has fallen by nearly half since 2006, when activity for the January-to-August period peaked at 8,250 permits, council statistics show.
Some remodeling companies are seeing an increase in business -- one firm recently did work for a customer who'd bought a foreclosure and needed to fix it up, for instance.
All this makes me wonder how many people would be knee-deep in home-improvement projects if this wasn't a down housing market and rough economy. Hmm ... sounds like a poll:
If you're eying a home-improvement project purely because you want to sell soon, keep in mind that your return on investment will probably be negative. At least that's what real estate agents have found since the bubble popped.
Of projects that saw national cost recovery rates of more than 80 percent in 2007, only one — a minor kitchen remodel, with 83 percent of cost recovered — was a strictly interior job. The others were an upscale siding replacement using fiber cement materials (88.1 percent), a wood deck addition (85.4 percent), midrange vinyl siding replacement (83.2 percent), and upscale vinyl and midrange wood window replacements (81 percent and 81.2 percent, respectively).
On the other hand, if your home is really outdated -- or in screaming need of maintenance -- then you're eliminating a lot of potential buyers if you put it on the market without working on it first. Decisions, decisions.
Buyers: If you could wave a magic wand and fix one thing about most of the homes you've seen, what would it be?