The planners, builders, lenders, and the key holders are all clearly rooting for a housing-price bounce to help restore economic growth. But some design and remodeling experts are hopeful that the real estate crumble, painful as it is, has reformed how consumers view the idea of "home."
Advocates of individualized and beautiful design through construction that uses transparent pricing (compared to prepackaged, industry-driven trends) argue that a homeowner's dream property is often lurking within the existing footprint. Or, perhaps it can be achieved with a conservative expansion that can bring more of the outdoors in and the indoors out.
[See The 5 Best—and Worst—Home Remodeling Projects.]
Whether or not long-term attitudes will change, there remains a sobering near-term reality: The housing recovery will be slow. Accordingly, many homeowners are looking at remodeling options to upgrade or bump out their existing dwelling rather than climb to the next rung on the property ladder (or even skip a few steps, which was common during the housing boom). In fact, the current real-estate climate can bring opportunity for savvy homeowners. Contractor bids are more competitive and contractors are more readily available.
During the housing surge ahead of the 2007-2008 credit crisis, significant portions of housing stock (both new and resale) became overly commoditized and threatened the sense of "homesteading" that emerged in the United States after World War II, argues Duo Dickinson. He's a Connecticut-based architect and author of Staying Put: Remodel Your House to Get the Home You Want, which hit bookstores in November.
"When money was inexpensive to borrow and the home you had in hand was always rising in value, the worth of your home (and what you thought about spending to improve it) was not much of a limitation on your expectations," says Dickinson. "It was guilt-free, binge-building gluttony on a massive scale, but now we all must go on a morning-after diet regime."
[See How Buying a Home Is Likely to Change.]
Nesting, not investing. Easy credit skewed some consumer expectations of home size, location, and price. But at a more intimate level, much of the personalization of homes was lost in the froth of the market. Homeowners and, in some cases, their real estate agents weren't necessarily thinking about giving the mud room priority for a young family of bike riders or acknowledging that a small efficient kitchen would satisfy a busy professional who never dirties a pot. Sellers and buyers were instead focused on buzz words like "granite" and "master suite."
Home buyers allowed the unrealistic promise of investment outweigh their actual needs and occasionally, their wants. Now, many are paying the price for ill-fated bets on home values; they're saddled with underwater mortgages (the loan is bigger than the home's worth). Some are determined to ride out the soft pricing patch and, in the meantime, are hoping to creatively stretch their current abode.
It's easy to see how investment can cloud the perception of "home." Housing remains the biggest single investment that most individuals or couples make in their lifetime.
But consumers can't entirely check their emotions at the front door. "Spending on homes often has nothing to do with economic potential and there is no guarantee ever that a house will get more valuable," says Dickinson.
[See 7 Easy Ways to Trim Your Mortgage Costs.]
Instead, the emotional part of homeownership should inform sound decision-making; the investment should be based on who lives there now. "It might make sense to spend $5,000 on a kitchen, or it might make sense to spend $50,000 on a kitchen you'll use every single day and love," Dickinson adds.
Bottom dwellers. There are signs of economic improvement, particularly in consumer and business spending, but anemic hiring and excess housing inventory is expected to continue to negatively impact the real estate market. Housing experts emphasize that market health should be judged on a region-by-region basis.
An American Institute of Architects survey shows that business conditions at residential architecture firms remained very weak in the third quarter, partly due to seasonal year-end slowing. But data were also consistent with a market that is still bumping along the bottom of a protracted cyclical downturn, the trade group said in a release. All major residential construction sectors remain in decline, with second and vacation homes rated as the weakest.
Conversely, most residential architects rate the home-improvement market in their area as healthy. Some of this strength comes from owners who have decided not to trade up, and have instead chosen to remodel their current homes, the AIA says.
[See How to Talk With an Architect.]
Even remodeling budgets look to remain conservative. Home-improvement spending will remain tepid through the first half of 2012, according to the Leading Indicator of Remodeling Activity released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.
"Absent a more sustained upturn in the broader housing market, particularly in the sales of existing homes, there's not much to propel growth in home-improvement spending," said Kermit Baker, director of the Remodeling Futures Program, as part of the report's October release. "Homeowners are continuing to undertake smaller jobs, but are still nervous about larger discretionary projects."
Remodeling return-on-investment continues to ease. Since peaking in 2005 at 86.7 percent, the overall average cost-value ratio has dropped 29 points to 57.7 percent, writes Sal Alfano, editor of Remodeling Magazine, as part of his publication's annual Cost vs. Value Report on remodeling investment return trends.
Project costs continue to drop, although more slowly: Costs decreased 6.9 percent in 2009, 2.3 percent in 2010, and just 1.9 percent this year. Decreasing cost usually results in a higher cost-value ratio except when resale value decreases even faster. And that is the case once again this year, when continued volatility in housing prices has pushed average project resale values down 6 percent, Alfano says.
Homeowners should always carefully scrutinize remodeling expenses, but should be aware that in the current market, they may not recoup as much from an upgrade as they thought. Second, with resale so uncertain, remodeling to fit family needs (and not trying to guess what future buyers might like) may make sense now more than ever.
[See When DIY Ends Up Costing More.]
Author and architect Dickinson says that he's hopeful that consumers will emerge from the housing slide better educated and empowered to demand strong design, home customization, and à la carte pricing disclosure over standard builder and remodeling packages, whether a consumer is building new, customizing a resale, or reworking what's familiar. "What home should be about is contact with the outdoors or a nighttime gathering place, not a pod of hermetically sealed processed air," he says.
For homeowners mulling changes that can turn where they eat and sleep into a home they'll want to keep for a long time, Dickinson raises these questions and tips:
• Expand without adding on; entire walls don't always have to be removed to "open up" a space.
• Think about how interior space relates to the outdoors; big views should have big openings.
• Sometimes, walls are a good thing—and hide lots of clever storage.
• Style is not a religion.
• Color is cheap.
• Empty nesters can often re-nest in the same spot.
• Homeowners should ask: Will I really use the square footage devoted to a "master suite"?
• Projects from $500 up without a plan are a risky roll of the dice.
• Don't forget hallways and landings.
• Design front porches that are actually usable.
See more at www.stayingput.com.
Reader Comments