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Published: Saturday, 11/19/2011

Pace of remodeling rises, but more homeowners keep projects modest


MINNEAPOLIS -- Chris and Jennifer Roman loved everything about the handsome Tudor-style house in Minneapolis, so they bought it within hours of its hitting the market.

Never mind that the kitchen had been remodeled in the 1980s with blue counters and bump-out windows, and the basement looked like a dungeon. Now, after two years of planning and saving, they have crews ripping apart the old kitchen in preparation for a new one.

But the dark and musty basement, which Ms. Roman described as "super-creepy," with "dark purple carpet and weird electrical outlets," is going to have to wait.

"We don't want to repeat history," said Ms. Roman, referring to a big loss they took on a house they recently sold. "If things were better and prices could support a larger loan, we would have done the basement at the same time."

It's a common situation for homeowners.

Many are moving ahead with improvement projects, especially since the unpredictable housing market could make it less appealing to upgrade to a nicer house. But they are scaling back their ambitions and spending less.

Builder Scot Waggoner, who is doing the work on the Romans' kitchen, said that, unlike many of his competitors who have gone out of business, he has experienced an uptick in business, especially from people like the Romans, who are getting such good deals on houses that they can finally afford to fix them up a bit.

National statistics from BuildFax show remodeling work picking up during the housing slump.

But some observers think the surge mostly reflects fix-up work on foreclosure properties that previous owners trashed.

That's led to remodeling booms in the cities hardest hit by foreclosures, such as Las Vegas and Phoenix.

"There is a somewhat popular belief that remodeling activity is counter-cyclical to new construction and that's just simply not the case," said Jonathan Smoke, an economist with Hanley Wood. "Both new construction and remodeling activity are correlated to overall economic performance."

One of the Romans' challenges has been identifying comparable home sales in the neighborhood that will help their banker justify approving a loan to finance the project.

Many houses are selling for less than their owners have invested in them, so that means more conservative approvals.

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