Inflated and Recession-Resistant Home Remodels

Although essentially every home remodel is showing poor resale value in the current housing market, things are rarely as good or as bad as they initially appear. Some projects are faring better than others, and some show promise for even stronger growth in a post-bubble housing recovery. Understanding which projects are holding their ground, and more importantly, understanding the reasons behind the resiliency of various projects can help you make the best remodeling and home-buying decisions for the short and long run.

The Split between Kitchen and Bath Remodeling
These two champions of home remodeling (in the view of both everyday homeowners and real estate agents) tend to be lumped together. One of the largest remodeling associations is the National Kitchen and Bath Association. Yet, while sinks, cabinets, and tile explain the natural connection, kitchen remodels are performing demonstrably better bathroom remodels. According to Remodeling Magazine's Cost vs. Value Annual Report, the resale value of a bathroom remodel fell from 78.3 percent in 2007 to 74.6 percent in 2008, the largest decline of any remodeling project. During the same period, full kitchen remodels fell from 78.1 percent to 76.0 percent, one of the smallest declines.

Of course, it's important to understand that resale value and remodeling demand isn't the same thing. ServiceMagic—leading online resource connecting homeowners and home improvement contractors—has seen online requests for bathroom remodels hold their ground much better than kitchen remodels over the past year. These two trends may seem paradoxical without an analysis of homeowner behaviors and preferences. During 2008, as more and more homeowners began to feel the pinch of the recession, remodeling plans had to be scaled back, kitchen remodels had to be placed on hold, and bathroom remodels (at half the price) picked up the slack. This left more and more homes with shiny new bathrooms and lackluster kitchen areas. Meanwhile, most prospective home buyers are more likely to be attracted to a home with a ready-made kitchen that just needs a bathroom remodel than vice versa.

Uncertain Future for Basement Remodels, Home Additions, and Garage Remodels
Arguably, basement finishing is the most recession-resistant, or at least non-inflated, remodel out there. During tough economic times, finished basements make for inexpensive home additions. During boon times, they provide perfect entertainment areas. Plus, it's hard to argue that unfinished basements used for storage areas are an efficient use of space. That said, home additions of any kind face an uncertain future. A recent study by the AARP shows that multigenerational households are on the rise, up from 5 million in 2000 to 6.2 million last year, an increase from 4.8 percent to 5.3 percent of all households. Yet, the value of additional, separate living areas is anything but a sure bet: According to the National Association of Home Builders, 88 percent of builders surveyed in January said they are building or planning to build a larger share of smaller homes.

At the same time, predicting the resale value of garage projects can be as dicey as predicting the stock marketý.In 2007 and the first half of 2008, gas prices soared, homeowners looked for ways to drive less and less, and the importance of car shelters decreased. Thus, many homeowners completed a garage remodel that converted this space into a living area. In the last six months, gas prices and auto sales have plummeted. Some homeowners, in financial straits and unable to get financing, are trying to hold on to their current wheels as long as possible, while others are buying more expensive hybrids. Both homeowners need shelter to protect their automobiles.

Niche Remodeling Projects with Bright Futures
Although the following remodels may never approach the supremacy of added property value enjoyed by kitchen and bathroom remodeling, these projects have a bright future and are most likely to show stronger resale value five, ten, or twenty years down the road.

Home Theaters and Entertainment Areas: From the ever-increasing size of televisions, the popularity of Netflix, and a host of new cable, movie, and Internet-streaming technologies preparing to enter the market, a room or area with the design and electrical capabilities for this brand of entertainment is almost guaranteed to be in vogue for generations.

Outdoor Kitchens: One of the hottest residential trends of the last decade, an outdoor kitchen doesn't have to scream indulgence. Without a strictly defined interior kitchen space, you may be able to create your dream kitchen for a fraction of the cost by taking the project outside.

Home Office Remodels: From an increase in the market for independent contracting services to more businesses offering to eliminate employees' commute, and as more professionals realize the benefits of working from home, having a ready-made area for this purpose—built-in cabinets, desk, flooring, and comprehensive telecommunications—is undoubtedly going to find a wider audience in the years to come.

Rate This Article

OVERALL RATING Be first to rate this article!

YOUR RATING

Saving Rating...

Log-in to save your ratings!

Recommend This Article

Digg
Reddit
Del.icio.us

ServiceMagic Articles To-Go