Remodeling in 2010

Because of the recent release of the cost vs. value report there have been several interesting articles about remodeling in the national media.  This one from MSN real estate is the best I have seen.

Excerpt from MSN….

Basic replacements rule
As a group, low-cost replacements — new siding, windows, doors and roofing — deliver the best bang for the buck now, a considerably better payback than from a two-story remodel or a kitchen remodel.

Given great improvements in materials, you can replace your inefficient 10- or 15-year-old products with highly efficient ones for a decent return when you sell. In addition, the improvements help you save on heating and cooling bills. Replacing leaky windows with highly efficient newer ones is a good example. The technology behind the glass and frames has so improved that you’re tightening up your home’s weatherproofing in the process. You get more comfort and, from the real-estate agent’s point of view, new windows show off your house from the street.

Replacement projects included in the Cost vs. Value survey all cost less than $20,000 and most cost considerably less. They instantly enhance curb appeal, boosting a home’s marketability, and they require little maintenance once installed. A bonus: Most of these replacements qualify for a federal tax credit for energy efficiency (not included in Remodeling Magazine’s ROI calculations).

See detailed project descriptions here.

1. Replace the front door.

• The absolute best return on the money of any of the projects surveyed — 129% of cost — is gained by replacing a beat-up front door with a $1,200 steel-shell door filled with foam insulation.
• A new fiberglass door (more expensive, at $3,490) returns less, about 65%. (Fiberglass is the new chic building material because it’s rugged and durable, can be painted and will mimic almost any wood. Unlike wood, it doesn’t crack, warp or shrink and needs zero maintenance.)
• Spend about $7,500 on an entire new entrance, including a widened opening, a solid-core wood door and high-end glass, new lighting and better locks, and you’ll recoup 69%, on average.

2. Replace home siding

• Replacing old siding with a durable fiber-cement product ($13,287) recoups about 84% at resale.
• Use vinyl siding ($10,607) to get an 80% return.
• Foam-backed vinyl ($13,022) costs more and earns back less — roughly 79% — but it is much more efficient at insulating a home.

3. Replace windows. Three of the four window-replacement projects considered in the survey pay back about 77%:

• Wood-trimmed windows ($11,700).
• Lower-end vinyl windows ($10,728).
• Windows trimmed in higher-end vinyl ($13,862).
• The fourth project, higher-end wood-replacement windows ($17,816), has a return of about 72%. Fiberglass windows weren’t included in the study.

Replace the roofing: Spend $19,731 on new fiberglass asphalt shingles and you’re likely to recoup about 67% of the cost.

• A higher-end roof replacement using standing-seam metal ($37,359) pays back about 61% of the cost, agents told the survey.

Additions aren’t cost-effective
Except for a new deck, which pays back nicely, adding to a home’s footprint brings a poor return these days.

A new deck

• Wood is high-maintenance, but homebuyers love it: A new wood deck ($10,634) returns 81%.
• A new deck of midrange composite planks ($15,373) returns around 71% of the cost at resale.
• A higher-grade composite ($37,745) brings an ROI of about 61%.

Other additions

• Adding a 200-square-foot sunroom ($73,167) recoups 51%.
• A high-end ($225,995) master suite project, adding 640 square feet to the house, including a bath with walk-in shower and stone walls, brings a 56% return.
• A less ambitious, less costly ($103,696), 640-square-foot master suite addition including whirlpool bath and ceramic tile recoups 65%.
• A garage addition ($87,230) earns back about 56%.
• A high-end bathroom addition ($75,812) earns about 58% at resale.
• Adding a midrange, 6-by-8-foot full bath ($39,046) recoups about 60%.
• Add a midrange two-story wing ($156,309) to the house, including 24-by-16-foot first-floor family room and second-floor bedroom and full bath, for a return of about 69%.
• A midrange family room addition ($82,756) returns around 65% of the cost.
• Adding a sunroom or home office were the projects that yielded the least payback, presumably because these special-purpose rooms appeal to fewer buyers and are in less demand.

Best use of the money (besides replacements)
Upgrading existing space is the best bet for recouping cost. It makes sense: Pouring a foundation, framing a structure and bringing in electricity and plumbing are among the most expensive aspects of a building project. When you can largely skip these steps and increase your usable space, the payback is richer:

• An attic conversion, including a 15-by-15-foot bedroom with dormer and a 5-by-7-foot bath with shower ($49,346) returns comparative gold: 83% return, on average. Agents in several cities said this job would return more than 100%.
• A basement ($62,067) remodel —a 20-by-30-foot entertainment room and 5-by-8-foot full bath — recoups about 75% of its cost.
• A midrange 5-by-7-foot bathroom remodel ($16,142) with standard fixtures and trim has a 71% ROI.
• Expanding that bathroom to 100 square feet ($52,295), including moving plumbing and wiring and adding higher-end cabinets and fixtures, brings a 62% ROI.

Kitchens and baths: Scaled back but ever popular
High-end kitchens and baths are fading in popularity, replaced by “very practical things,” Michelson says. “The $400,000 and $500,000 jobs are few and far between. The jobs between $50,000 and $200,000, we’re doing lots of those.”

Kitchen and bath remodeling hasn’t stopped, since these projects maximize the enjoyment of the most-used spaces in a home. But “people are definitely being smarter with their money,” Conneely says. “For instance, a $75,000 remodel five years ago? That same client would today spend $50,000.” People who blithely bought the best of everything now pursue the same look by choosing materials judiciously.

• A minor kitchen upgrade ($21,411) installing new cabinet fronts, laminate counters and other cosmetic improvements is a decent investment, at 78% ROI.
• A major kitchen remodel ($57,215) using midrange materials — semi-custom cabinets and laminate counters — pays back about 72%.
• A high-end major kitchen remodel ($111,794) with top-of-the-line cherry cabinets, stone counters, glass backsplash and expensive, built-in appliances, pays back just 63%.

Find a Local Remodeler

Howard Bingham Construction
www.howardbinghamconstruction.com

Oglesby Construction Company, Inc.
www.oglesbyhomes.com

Oregon Home Improvement Co.
www.ohico.net

Paul Marto Building Inc.
www.paulmarto.com

Stanley Home Renovation & Design, Inc.
www.StanleyHomeRenovation.com

If the Neighbors Are Underwater…

Millions of U.S. homes are worth less than their owners owe on them. Let’s say your mortgage is not underwater, but a number of your neighbors’ mortgages are. How can (and should) this affect your remodeling decisions?

Emotionally, you are right to be concerned about the remodeling return on investment, especially if many neighbors have either lost their homes to foreclosure or listed them as short sales. “The first thing that usually goes in these cases is the maintenance of the property,” appraiser Jim Amorin says. Technically, troubled mortgages shouldn’t do much to the value of your client’s home, especially if those homes have not sold below market value. The reality, of course, is that an abundance of for-sale signs and neglected or vacant homes can affect a neighborhood’s desirability.

On the bright side, many buyers of discounted homes have no choice but to remodel them, thereby increasing their value. More importantly, “the market will come back,” says appraiser John Bredemeyer. “Ask how long they’re going to be there.” If the horizon is long, they can remodel with some assurance. Plus, “the worst thing you can do, even in a soft market, is to allow anything on your property to deteriorate,” he says.

Cost vs. Value Report by Remodeling Magazine

Thanksgiving Fun Facts

• Sarah Josepha Hale, the enormously influential magazine editor and author who waged a tireless campaign to make Thanksgiving a national holiday in the mid-19th century, was also the author of the classic nursery rhyme “Mary Had a Little Lamb.”
• The National Turkey Federation estimated that 46 million turkeys—one fifth of the annual total of 235 million consumed in the United States in 2007—were eaten at Thanksgiving.
• In a survey conducted by the National Turkey Federation, nearly 88 percent of Americans said they eat turkey at Thanksgiving. The average weight of turkeys purchased for Thanksgiving is 15 pounds, which means some 690 million pounds of turkey were consumed in the U.S. during Thanksgiving in 2007.
• The cranberry is one of only three fruits—the others are the blueberry and the Concord grape—that are entirely native to North American soil, according to the Cape Cod Cranberry Growers’ Association.
• According to the Guinness Book of World Records, the largest pumpkin pie ever baked weighed 2,020 pounds and measured just over 12 feet long. It was baked on October 8, 2005 by the New Bremen Giant Pumpkin Growers in Ohio, and included 900 pounds of pumpkin, 62 gallons of evaporated milk, 155 dozen eggs, 300 pounds of sugar, 3.5 pounds of salt, 7 pounds of cinnamon, 2 pounds of pumpkin spice and 250 pounds of crust.
• Originally known as Macy’s Christmas Parade—to signify the launch of the Christmas shopping season—the first Macy’s Thanksgiving Day Parade took place in New York City in 1924. It was launched by Macy’s employees and featured animals from the Central Park Zoo. Today, some 3 million people attend the annual parade and another 44 million watch it on television.
• Tony Sarg, a children’s book illustrator and puppeteer, designed the first giant hot air balloons for the Macy’s Thanksgiving Day Parade in 1927. He later created the elaborate mechanically animated window displays that grace the façade of the New York store from Thanksgiving to Christmas.
• Snoopy has appeared as a giant balloon in the Macy’s Thanksgiving Day Parade more times than any other character in history. As the Flying Ace, Snoopy made his sixth appearance in the 2006 parade.
• The first time the Detroit Lions played football on Thanksgiving Day was in 1934, when they hosted the Chicago Bears at the University of Detroit stadium, in front of 26,000 fans. The NBC radio network broadcast the game on 94 stations across the country–the first national Thanksgiving football broadcast. Since that time, the Lions have played a game every Thanksgiving (except between 1939 and 1944); in 1956, fans watched the game on television for the first time.

Read more at History.com

Local Professional Remodelers Organization Member Wins National Award

Theresa Springer of the Home Builders Association of Metropolitan Portland was recently honored with the 2009 Council Award for Demonstrating Remodeling Excellence for Outstanding Associate Member. Springer is active in the association’s remodeling group, the Professional Remodelers Organization (PRO).

The award—known in the industry as the CADRE—was recently announced during the National Association of Home Builders annual gala in Indianapolis. The CADRE is the NAHB Remodelers highest national award for work at the local level and is given to individuals whose work exemplifies the best practices of the remodeling industry.

Springer joined the HBA’s PRO in 2004 and represents Pacific Residential Mortgage as a Senior Loan Officer. She has been working in home lending for more than 20 years and is one of the only Certified Graduate Associates in Oregon. Additionally, she is a member of the HBA’s Board of Directors, sits on the Sales and Marketing Council and is the newly appointed Vice-Chair of the Communications Committee.

“The PRO is dedicated to helping promote remodelers, support professional development, and grow leadership at the local council,” said PRO Manager Hallie Gentry, “and Theresa has definitely emerged as an active leader and example of excellence in her field. It’s always great to see deserving individuals receive honor for their hard work and achievements.”

Curb Appeal Is King

Remodeling Magazine, by Jim Cory

Why are seven of the top 10 value-yielding projects of the 33 projects ranked by Realtors in this year’s Cost vs. Value Report exterior projects?

Lots of reasons, the first of them being cost. In an economy where frugal is the word, each of the exterior projects comes in at less than $15,000. The project with the greatest return — a mid-price–point entry door — costs less than $1,200.

Another reason is appearance. Exterior improvements contribute to the overall look and feel of a building. “Curb appeal is king,” notes Strongsville, Ohio, Realtor Mike Pallendino — especially in a market with more sellers than buyers. Pallendino says that sometimes when he pulls up to a house that has a less-than-stellar exterior, clients ask him to just keep driving. “With the exterior updated,” he points out, “owners can concentrate on other parts of making the house their home.”

The ‘F’ Word

With home prices lower than they were a few years ago, and home equity tapped out for many consumers, function trumps glitz. “Three or four years ago, a $50,000 or $100,000 kitchen was a sensible investment,” says Kermit Baker, director of the Joint Center for Housing Studies of Harvard University, “because housing prices were increasing 6%, 8%, or 10% a year. So you were adding to the value and letting the equity build up.”

This year the Joint Center sees the total number of improvements (i.e., jobs) down 9% and overall remodeling expenditure down 3.5% to 4.5%.

Fewer projects means that those projects that just can’t wait get done. The projects that can wait — that are discretionary — often are postponed. That’s why total spending on “Improvements” (additions and alterations) was down while “Maintenance and Repairs” spending was up in 2007, the last year that the U.S. Census Bureau broke remodeling sales out in those categories.

Energized

Another big reason for the popularity of exterior replacements is energy efficiency. Not so important before. Definitely important now. Chalk some of that up to the American Recovery and Reinvestment Act tax credits available for energy-efficiency upgrades, including qualified roof and window components. That has helped boost homeowners’ — both buyers’ and sellers’ — awareness of such improvements. Some potential home buyers not only want a good-looking house, they want an energy efficient one, notes La Crosse, Wis., Realtor Kathy Fox. Clients, says St. Louis broker Dawn Griffin, are “willing to pay a little bit more if the house has new and energy-efficient windows.”

That’s because homeowners are now more aware of the fact that those windows or that siding can save them money in the long run by offsetting energy costs. The U.S. Department of Energy says that qualified (dual- or triple-paned) windows can save as much as 15% to 20% on energy bills. Foam-backed siding provides a modest boost in R-value as well as reduced sound transmission. Homeowners are drawn to improvements that help reduce the cost of maintaining the home over time. They are, Pallendino says, “more aware, these days, of the saving aspects” available through upgraded windows or a new HVAC system. But those functional improvements are “still not high on the list of must-haves.”

Turnkey Is Key

What is high up on that list is move-in condition. In a booming real estate market, marginal locations move because buyers are willing to invest the time and money into customizing. They think of the investment as part of the long-term cost of the transaction. In lean times, the opposite psychology holds sway. Marginally maintained houses get house hunters’ short shrift.

Bill Gassett ought to know. The Hopkinton, Mass., market where he has sold homes for 25 years hit its pricing peak in 2005 and is down about 25% since that time.

“The houses that get most significantly hurt by the market,” Gassett says, “are the ones that haven’t been cared for.”

Turnkey is what a house has to be these days to sell. In St. Louis, Griffin recently went into a home that had just come on the market. Price: $80,000. The house was old and the kitchen hadn’t been updated since the ’70s, she says. But though it wasn’t stylish, what it did have going for it was that the owner had maintained it well. “It was super well-kept,” Griffin says. “Roof in great shape. Gutters in great shape. And,” she adds, “that house was under contract in three days.”

Find a Local Remodeler

Brewer Brothers Construction
www.brewerconstruction.com

CastleRock Homes Inc.
www.castle-rock-homes.com

Craftsman Homes Group LLC
www.craftsmanhomesgroup.com

Crown Construction of Oregon LLC
www.crownconstructionoforegon.com

Master Plan Remodeling- Design/Build
www.masterplanremodeling.com

Neil Kelly Design/Build Remodeling
www.neilkelly.com

Olsen Homes & Renovation, LLC
www.olsenrenovation.com

Solaris Solutions LLC
www.solarissolutions.com

Thanksgiving Decorating Link Round-Up

Better Homes and Gardens – Tips on everything from candle displays to elegant centerpieces.

Angela Todd Designs – Local interior designer who will come in and do the decorating for you.

HGTV.com – Holiday decorating and entertaining ideas from Hollywood stars, department store holiday window archives and instruction on how to make candle holders out of ice.

Kimberlee Jaynes Interior Design – Holiday tables with a twist.

Disney Family Fun – Kid friendly holiday crafts and decorations.

MarthaStewart.com – Recipies, decorating and more in the usual Martha fashion.

Remodeling Activity Boosts Local Economies

Tell your husband “I’m not just trying to get rid of this 1950-era pink bathroom, I am helping the local economy!”…

Remodeling activity boost local economies and NAHB has the numbers to prove it. NAHB Senior Economist Elliot Eisenberg says on average, every $100 million spent on addition and alteration projects creates 690 full-time jobs (480 construction jobs, 110 wholesale and retail trade jobs and 70 jobs in business and professional services) and generates $36.7 million in local income and $3.2 million in local taxes. The “ripple effect” of all this economic activity adds even more to the positive impact. Remember, the ripple occurs because the local economy has increased by almost $40 million in taxes and local income ($36.7 million in local income and $3.2 million in local taxes) because of the additions and alterations that were performed. Once earned, this nearly $40 million gets spent, much of it in the local economy. And, in the process, this creates another 320 jobs — 70 in the wholesale and retail trade; 60 in local government; 30 in restaurants, bars and other eating establishments; 30 in healthcare, education and social services; and many other jobs in other sectors — not to mention $1.7 million more in taxes and another $17.5 million of local income.

Combined, the direct and ripple phases from that amount of additions and alterations would result in 1,010 jobs, $4.9 million in local taxes and $54.2 million in local income. Another way of putting it, says Elliot, is that every 10 jobs created doing building additions and alteration work leads to almost five more jobs through the ripple phase, and every $10 of tax revenue that’s initially generated creates another $5.40 due to ripple effects. Elliot also points out that, while additions and alterations always result in a temporary boost to the local economy, a permanent boost is also likely. That’s because, when additions and alterations result in a permanent addition to a structure, its taxable value rises and the flow of property taxes to all local governments improves.

Energy Tax Credits

This is the easiest to understand explination of all the tax credits I have seen. Click on the picture below for the full size version. Then roll over this interactive poster to see the requirements and deadlines for remodeling-related energy improvements and equipment. The information comes from Remodeling magazine’s coverage of the stimulus package.