b e s t
CHOICES
Remodeling
magazine’s 2008-2009 Cost vs.
Value report. (In other years, they typically
made back 87 percent of the investment.) So, as
housing values recover, you’re likely to recoup a
greater portion of the money you invest in your
house. But for now, you need to be savvy about
the projects you select and how you go about
them. If you want to renovate your kitchen, for
example, take a look at the kitchens of similar
homes in your neighborhood. “If you have a
$
200,000
house, don’t plan a kitchen for a
$1 million house,” stresses Leslie Sellers,
president-elect of the Appraisal Institute.
While updates are important when it comes
time to sell, so too is general maintenance, says
Jayne Cox, who owns a real estate firm in
Lexington, Kentucky. “Buyers are also looking
more intently at systems like heating and air-
conditioning,” she says. “They want homes that
are ready to move into and need little work.”
Prices may be down— but
they won’t stay down.
As the economy perks up and
demand for housing increases, the costs of
building supplies and labor will rise as well.
“Everyone who’s been adjusting prices is going
to readjust in the other direction,” says Alfano,
of
Remodeling.
Financing costs are also likely to
drift up in the coming year. “It will probably be
in the second or third quarter of
2010
that the
Federal Reserve decides to hike up interest
rates,” says Andres Carbacho-Burgos, an
economist with Moody’s
Economy.com.
At some point, inflation will begin to pick up
slightly too, which will also boost the value of
houses once again. Meanwhile, steady popula-
tion growth and immigration will increase the
demand for houses over time, further driving
up prices, says Randall Olsen, an economics
professor and housing authority at Ohio State
University. That makes the opportunity today
even more compelling.
Renovate now— and enjoy
it for years to come.
At the end of the day, we don’t spruce
up our homes just because it makes sense
financially. We do it because our homes are
where we watch our children take their first
steps, where we celebrate birthdays and
anniversaries, and spend all-too-fleeting years
together as families. “We knew when we
started our renovation that we were going to
raise our family here and that we wouldn’t be
moving—that’s how we justified putting the
money into it,” says Dana Liston, this year’s
Home Improvement Challenge grand-prize
winner. “The money is kind of fading into the
background now that we see how much the
kids and our friends enjoy spending time here.”
That’s a return on your investment that even
the best economist couldn’t quantify.
Q
YOU’RE
READY FOR
A REDO
WHEN.
..
1 . Y o u h a v e 2 0
p e r c e n t o r m o r e
e q u i t y i n y o u r
h o u s e . T o f i g u r e ,
s u b t r a c t t h e
a m
o u n t y o u o w e
f r o m
t h e v a l u e o f
y o u r h o m e , t h e n
d i v i d e t h a t b y t h e
a m
o u n t y o u o w e .
2 . Y o u h a v e a t
l e a s t t h r e e
m
o n t h s ’ w o r t h
o f l i v i n g e x p e n s -
e s s a v e d . ( I f y o u
h a v e a s i n g l e
i n c o m
e , y o u
s h o u l d h a v e s i x
m
o n t h s . )
3 . Y o u r c o m
-
b i n e d m
o n t h l y
d e b t i s n o
g r e a t e r t h a n 4 1
p e r c e n t o f y o u r
m
o n t h l y i n c o m
e .
4 . Y o u h a v e a
s o l i d c r e d i t
s c o r e —
p r e f e r a -
b l y 7 2 0 o r h i g h e r .
You need to b e especially savvy about
the projects you select and how you go about
them. If you have a $200,000 house, don’t plan
a kitchen for a $1 million house.
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