As we went to press with our annual Cost vs. Value Report, homeowners were still investing in their homes at record rates. Last year, homeowners, taking advantage of record-low mortgage rates, refinanced their homes and leveraged their equity into more than $96 billion in cash. And while some used the money to take a vacation, a full 35% of that money was reinvested in the house in the form of a remodeling project. Today, existing homes are still selling at all time highs -- more than 5.7 million sales are projected for 2003, nearly an 8% increase in two years. With mortgage rates still near 40-year lows, having some work done on the house has never been more affordable.
Overall, the Cost vs. Value Report bears this out. Despite a general slowdown in the national economy in the first quarter, the value recovered across all remodeling projects in the Report has jumped by more than 5% to 86.4%.
As always, however, some markets are performing better than others -- in some cases much better. This is especially true, as Kermit Baker points out in this year's Report, in areas that are among the top 50 in house appreciation. In these markets, average cost recouped was more than 100%.
Where does that leave you if your customers are in a softer market? It depends on how you interpret and use the Report. The first thing to remember is that the average for a given market says little about a particular house in a particular location. Remember also that house resale values are not self-determined. They are influenced by the value of surrounding homes, as well as by how fast real estate in the general area is changing hands. Still, homeowners are quite naturally concerned about overbuilding for their neighborhood, and where this is a major concern, there is no substitute for an independent appraisal by a Realtor or other qualified real estate professional.
People invest in their homes for all kinds of reasons, however, and increased resale value isn't often at the top of the list. In most cases, homeowners choose to remodel for reasons that transcend dollars and cents: A baby is born; a child goes off to college; someone gets a new job; someone retires.
As remodelers, we provide a service that encompasses convenience, safety, security, and energy efficiency, as well as a pleasing aesthetic and a measure of emotional satisfaction for our customers. It's hard to put a price tag on that.
Sal Alfano, Editor-in-Chief