Redoing houses tops buying new
Owners go for quality, not size
2/5/2012WASHINGTON -- Do you fit any of these descriptions?
● You came through the housing bust and recession far more debt-averse than you were before.
● You've been reluctant to consider selling your house because you don't believe you'll get what it's worth.
● Buying a new house is out of the question, despite today's low interest rates, because qualifying for a mortgage is so difficult.
● You've concluded that it's smarter to spend some money on making the house you already own more comfortable and up to date and just stay put for a while.
Sentiments like these are fueling post-recession interest in remodeling. According to federal estimates, by late last year the annualized dollar value of expenditures on renovations outstripped expenditures on newly constructed single-family homes. In contrast, in prerecession years, the ratio was sometimes 3 to 1 in favor of new construction.
Interviews with builders and remodelers around the country indicate that in general, the projects are no longer on the grand McMansion show-off scale of five to seven years ago, but less costly efforts with more emphasis on finishing details and quality than on square footage.
Bob Peterson, owner of a remodeling firm in Fort Collins, Colo., said he is experiencing a significant jump in interest in renovating, especially from owners who have been in their houses for years, have built up some savings, and have not fallen behind on their mortgages.
He said the average project his Peterson's firm is doing costs about $45,000.
Where do homeowners go for their money for remodeling? Bruce Case, president of a remodeling firm in Bethesda, Md., said local and regional banks and credit unions are increasingly important sources.
They tend to know the local real estate environment better and "are willing to look at [applications] more holistically," he said.
Some clients are using the Federal Housing Administration's renovation financing program known as "FHA 203(k)." Others who have solid equity stakes, high credit scores, and other assets that they can bring to the table are convincing large national banks to give them a mortgage. And a few are pulling on lines of credit that weren't yanked or slashed during the recession.
What Mr. Case and other remodelers said they are not seeing clients who fret about immediate paybacks from improvements. Most owners want assurance that their renovations will enhance the property's market value, but boom-time expectations of 100 percent-plus immediate returns on investment are gone.