When the housing bust started and home prices began their slide, some homeowners thought the cost of remodels might slide proportionately. That did not happen because the cost of remodeling was never temporarily and artificially inflated, as were some home prices.
For instance, a $50,000 oak and granite kitchen remodel done in a Long Beach home that was valued at $425,000 in 2002 did not cost $100,000 in 2006 when the same house might have risen to $800,000 in appraised value. The $50,000 kitchen remodel of 2002 probably cost $55,000 or $60,000 in 2006.
So when the party was over in the real estate and new-home market, the party did not end in the remodeling business, though it slowed down a little bit.
According to Harvard University’s Joint Center on Housing Studies, remodeling activity has held pretty steady at about $172 to $176 billion in 2007 and is projected for the same in 2008, up from $143 billion in 2004 and down from a peak of $181 billion in 2006.
So the cost of remodeling will not drop 20%, as have the prices of homes in some areas, and waiting for that to happen is useless.
Still, there are reasons why this is a good time to remodel:
1. Interest rates are low, so if you have any untapped equity, the price to borrow against it is very much in your favor.
2. Houses age no matter what the market is doing. Roofs need to be replaced and exteriors painted and worn appliances fixed or replaced.
3. As this is not a good time to sell, and may not be for a few years, it could be time to make the current house a better place for you and your family.
4. Competition is strong among remodeling contractors and the new-home builders who are now remodeling. One contractor told me he is more interested in making price adjustments to get the work. Not radical adjustments, because wages and materials are still high, but there is more flexibility than before.
5. Unless it’s a very hot contractor, you won’t have to wait six months to a year to get started. And if you begin now, you can be done in time for Thanksgiving.
Remember a few years ago when the biggest complaint was that contractors did not return calls? They do now.
Any thoughts on this?