10 Reasons to Remodel Now

1. WEAK RESALE MARKET.

With a glut of existing homes for sale in many communities around the country, the likelihood of getting the optimum price for a house is not great. Many cities have experienced a 15-20% lowering in the market value of houses. And it’s taking 3-4 times longer to sell houses as compared to a couple of years ago. As a result, it may still be quite a while before relocation makes good economic sense as a means of improving one’s lifestyle.

 

2. LOWEST LABOR COSTS IN YEARS.

Since new house starts are way off, additional labor sources are readily available for remodeling in all trades including carpentry, plumbing, and electrical and at very reasonable rates. While the skills of these people may not be as refined as most remodeling projects may require, the extra labor supply has temporarily reduced remodeling labor costs in the range of 10-25%.

 

A flood of attractive new products has been introduced, particularly in the kitchen and bath markets, just as housing starts and the sale of existing homes have dropped off nationally. As a result, many of these new products have been positioned with lower starting prices to gain market share. This kind of bonanza has not happened in recent memory.

 

Should there be a large amount of general carpentry and mechanical work involved in your project, the extra supply of readily available labor will enable renovation companies more latitude in “unbundling” the project to reduce costs in order to meet a specific budget target. Here is one creative example. While this approach is not suitable for all clients or circumstances, one company could design the kitchen project with you and, at a minimum, generally furnish and install the cabinetry, counters, and installation. Additionally, they could write the specifications for the other work involved so you can receive direct bids from the trades. Under this approach, you assume the risks and responsibilities of coordinating the trades in return for a lower overall project cost. You should ask professional renovation firms for further advice, details, and variations on this approach.

 

Just a year ago, people complained that they could not even get a plumber to show up at the job much less receive an estimate. Now you are assured of much prompter service from almost anyone you call, and written, businesslike proposals in a matter of a few days. Even cabinet deliveries are faster by 1-2 weeks because the new construction slowdown has reduced production time. What this means to the consumer is that there is no better time than the coming months to receive first class service on a remodeling project. Providing you do business with a professional firm that will be in business to service you next year, you are less likely today to suffer through the delays, shoddy workmanship, and cost overruns that perhaps were associated with a friend’s remodeling experience of just a year or two ago.

 

As reported in The Wall Street Journal, “lenders are competing as hotly as ever for borrowers who qualify” despite the current soft real estate market in the country. “Both in terms of advertising and pricing,” they are “tending to be more competitive.” Indeed, “many are waiving upfront ‘points’ and other fees that borrowers usually pay to close home-equity credits.”  So with lower demand in new residential and commercial construction, select local bankers are now making more money available for remodeling than ever before and at rates as low as what fueled the recent housing boom!

 

Interest rates are at their lowest levels in years. You now have a unique opportunity to reduce a whole lot of debt over the life of your existing mortgage by reducing its terms to 15 years. At the same time, you can increase the value of your home by doing the renovation projects you have always wanted. Additionally, it’s possible that you can perhaps reduce, or at least maintain, your monthly house payments. It doesn’t get much better than this!

 

Here’s how it works. Let’s say you have a $200,000, 30-year mortgage at 9%, on a house now valued at $450,000 in today’s market, with a remaining balance of $100,000 at $1,609.25 per month. You would like to do over the kitchen at an estimated $50,000. If you were to refinance your existing mortgage, while wrapping in the renovation project at the same time, at 6 1/2% for 15 years, your monthly payments would be $1306.66.

 

When was the last time you saw such compelling financial data to make an investment that will benefit you and your family so many ways.

 

With these kinds of “probable returns on the money you spend,” the highly respected Money Magazine ranked kitchens and baths as “the most cost-effective renovations” to undertake. Writes the editors of Money, “a modern kitchen is both a workplace and family room.” While impartial home appraisers advise spending no more than 15% of current house value for a new kitchen, Money suggests you “try to confine your spending to about 10%” should you wish to resell in the near future. Of course, these percentages are only guidelines and need to be adjusted according to local real estate values.

 

Realtors have known this fact for years. That’s one reason why a remodeled kitchen or bath is frequently cited as a home’s major feature in a real estate ad. So if you choose to remodel a kitchen or bath in the coming months, and then decide to relocate in 2-3 years when the resale market has fully recovered, the chances of your house selling quickly at an optimum price are excellent. Plus you are assured of recovering your entire investment within this time period, if not actually make some additional money off it!

 

Despite all the strong economic logic for remodeling now, none is more important than knowing the whole family gets to enjoy an improved quality of life right away in a home and neighborhood they feel comfortable with. Such emotional satisfaction can never be measured in dollars and cents, only in the wonderful memories of holiday gatherings and spirited parties with friends in your new kitchen.  In the final analysis, where else can a person earn an 80-125% return on an investment the entire family can use and enjoy everyday while reducing your debt substantially? There are not many answers to that question. That’s why a remodeled kitchen or bath makes so much practical and economic sense right now!