Remodeling Shifts From Sexy to Simple
Saturday, March 24, 2007
It looks as if the days of homeowners clamoring for every bell and whistle available in remodeling jobs may be over for a while.
With home prices stagnant or dropping in many neighborhoods, homeowners are being more careful about how much they spend to improve their homes, experts say.
That doesn't mean that renovations have stopped -- just that the focus has shifted.
"There has been some softening at the upper end of the renovation market" because price escalation has stopped and home equity loan interest rates have jumped, said Kermit Baker, project director of the Remodeling Futures Program at Harvard University's Joint Center for Housing Studies. "People are worried about over-investing in their neighborhood."
He said, "People are looking at more mid-range projects rather than the top-shelf items and focusing on more routine replacement."
Mid-range projects have a "higher payback than upper-end renovations," he said.
That's borne out in the latest Cost vs. Value Report published by Remodeling magazine and the National Association of Realtors.
For instance, where the 2005 report showed upscale bathroom remodels bringing sellers 93.2 cents on every dollar spent, the 2006 report showed a return of only 77.4 cents. Mid-range bathroom remodels brought $1.02 for every dollar spent in the 2005 report, but only 84.9 cents in 2006. The return is higher in the region that includes the Washington area.
But changes in the real estate market and increased remodeling costs haven't discouraged most Washington area renovators, according to Vince Butler, past chairman of the National Association of Home Builders' Remodelors Council and president of Butler Brothers Corp. in Clifton.
"Across the board, we really haven't seen any kind of pullback," Butler said. "We've only had one customer so far that was concerned" that the planned project had gotten too far ahead of the market and changed his mind.
Many local home sellers "have kind of been shocked by the change in the market and not being able to sell, so they need to go back to the basics and look at what they need to fix up to make their house look really good," said Dennis Melby, an agent with Long & Foster in Bethesda.
"If you renovate a bathroom or a kitchen, you get most of the money back," he said. "So that's where people are putting their money and where they should continue putting their money."