Don't forget the bathroom. Image from Flickr.

Many people balk at putting money into their homes in the current situation. Home prices and values are falling, and equity loans for home improvements are all but impossible to get. With falling values, few people have any equity left.

No one can blame homeowners for not wanting to deplete their savings to invest in something that has a depreciating value. However, homeowners must remember that their homes are still their greatest assets, and even if they can’t build value they can slow the fall.

Choose the Project that Fits Your Budget

If getting a loan is not be a viable option, choosing a project that is appropriate for your budget is very important. There are projects that will increase the value of a home that will fit almost any budget level.

You must choose a project that generates the greatest return on  your investment. As always, try to use the bank’s money if possible, but using your savings could still be worth the investment.

High Cost Projects

When choosing more costly projects, the homeowner needs to think infrastructure and not cosmetics. Projects that add to the longevity and energy efficiency of the home should be at the top of the list. One of the up sides of an economic downturn is that prices for services have fallen, too. In relative terms, it may be more cost effective now to make some major upgrades that you have been putting off.

For example, replacing your current siding with fiber-cement or foam-backed vinyl siding can be done more cheaply now and still net an 87 percent return on investment with energy savings and increased home value upon resale. A valuable room that is often neglected is the bathroom. Realtors estimate that a remodeled bathroom can yield as much as a 71 percent return on investment when you sell a home. Remodeled kitchens net a similar return on investment, as well.

Medium Cost Projects

If you do not have access to enough credit or savings for those projects, there are still significant gains you can make without spending quite as much. One of the highest rates of return on investment is actually found outside the home. The addition of a well-made, well-designed wood deck can get you up to an 81 percent return.

If it cost you $10,000 to build the deck, you could add $8,100 to the selling price of the home. If fiber-cement siding is too costly, upgrading with vinyl siding is still a good investment. Vinyl siding garners about the same return as the wood deck: 81 percent. Even minor kitchen remodeling and upgrades will net you a nice return. Upgrading the countertops alone can bring you a better asking price.

Something is Better than Nothing

Even if you can’t do everything, do something. Your home is the most important piece of your financial portfolio, and doing some work now while prices are down can pay off big down the road. The housing market will rebound someday, and you could get an even higher return when it does.

Downtown Indianapolis

Even if you’re one of the many people who are scrambling to find cash until payday, now may be a good time to buy a house. Plunging house prices and rock-bottom interest rates on secured loans have made housing across the nation more affordable in the second quarter of 2009 than it has been in the last 18 years, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) released on August 19.

“The increase in affordability — along with the $8,000 federal tax credit for home buyers — is stimulating demand, particularly among young, first-time buyers,” said NAHB Chairman Joe Robson, a homebuilder from Tulsa, Oklahoma, in a prepared statement.

According to the press release:

The HOI showed that 72.3 percent of all new and existing homes sold in the second quarter of 2009 were affordable to families earning the national median income of $64,000, down only slightly from the record-high 72.5 percent during the previous quarter and up from 55.0 percent during the second quarter of 2008.

The NAHB/Wells Fargo HOI is a measure of the percentage of homes sold in a given area that are affordable to families earning that area’s median income during a specific quarter. The NAHB considers a home affordable if a family making the area’s median income would devote no more than 28% of its take-home pay to housing costs.

The winners are . . .

The older, industrial, Midwest cities generally offer the best housing prices. Indianapolis, Indiana, has led the HOI for 16 straight quarters. At the end of July, 2009, nearly 95% of all homes sold there were affordable to families earning the area’s median income of $68,100. Other leaders were Youngstown and Dayton Ohio; and Detroit and Grand Rapids, Mich.

Indianapolis, once again, was the most affordable major housing market in the country during the second quarter. Almost 95 percent of all homes sold were affordable to households earning the area’s median family income of $68,100. Indianapolis has now topped the affordability list 16 consecutive quarters.

Inside the Indianapolis Central Library

Also near the top of the list of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Detroit-Livonia-Dearborn, Mich.; Dayton, Ohio; and Grand Rapids-Wyoming, Mich.

Several smaller housing markets posted even higher affordability scores than Indianapolis, with Kokomo, Ind. outscoring all others. There, almost 98 percent of homes sold during the second quarter of 2009 were affordable to median-income earners. Other small housing markets ahead of Indianapolis on the affordability scale included Lansing-East Lansing, Mich.; Mansfield, Ohio; Elkhart-Goshen, Ind.; Lima, Ohio; and Bay City, Mich.

New York-White Plains-Wayne, N.Y.-N.J., where just over 21 percent of all homes sold during the period were affordable to those earning the median income of $64,800, was once again the nation’s least affordable major housing market in the second quarter. This was the New York metro area’s fifth consecutive appearance at the bottom of the list. Other major metro areas near the bottom of the affordability chart included San Francisco; Honolulu; Los Angeles-Long Beach-Glendale, Calif.; and Santa Ana-Anaheim-Irvine, Calif.

Among smaller metro areas, San Luis Obispo-Paso Robles, Calif. was the least affordable market, followed by Ocean City, N.J.; Santa Cruz-Watsonville, Calif.; Flagstaff, Ariz.; and Santa Barbara-Santa Maria-Goleta, Calif., respectively.

Some gains are offset by losses

Nothing comes without costs, naturally, and the improved affordability of homes comes at the expense of sellers. Zillow.com reports that the purchase price of more than 30% of all homes sold during the second quarter of 2009 was less than what the sellers originally paid.  Zillow.com data shows that the longer a seller owned a home, the more likely he or she was to profit from the resale, but almost everyone who bought within the past five years and sold during the second quarter of this year lost money on the deal.

According to the S&P/Case-Shiller Home Price index, the average U.S. home price has dropped more than 32% from its peak in the summer of 2006. And for most of the second quarter, mortgage rates were historically low, under 5% for a 30-year fixed-rate loan.

Other gains are offset by heartaches

Many home sales in the second quarter were the result of foreclosures. Foreclosed homes are often sold at rock-bottom prices to produce quick sales. According to Foreclosure.com, there were more than 87,000 repossessions in July of this year, approximately three times as many as there were in July, 2007.

Detail from "A Hopeless Dawn" by Frank Bramley

According to preliminary estimates released by the Bureau of Economic Analysis, real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 5.7 percent in the first quarter of 2009. In the fourth quarter of 2008, real GDP decreased 6.3 percent.

Other indicators are down, too

The GDP is the most commonly-used measure of economic strength or weakness.  But if you’re unemployed and searching for a job or underemployed and looking online for quick cash to get by until payday, it offers little insight for assessing your own economic prospects. For anyone in need of cash now, other economic indicators may hit a little closer to home but are no more encouraging.

JOBS

According to the Bureau of Labor Statistics, the lowest unemployment rate we’ve seen since 1980 was 3.8% in April of 2000.  The unemployment rate for May 2009 continued to rise, increasing from 8.9% the previous month to 9.4%. To put that into perspective, unemployment reached 24% in the Great Depression, and 9% in the last oil-fueled recession of April 1976.

The government’s methodology for calculating unemployment has become controversial and the relevance of government statistics to the current composition of the job is questionable. The government’s figures do not include the 3.7 million-plus people who are reluctantly working only part time, and the “discouraged workers” (read Don’t Give up the Job Search) who have given up scouring want ads for seemingly nonexistent jobs. When these people are included, the unemployment rate is nearer to 16%.

PERSONAL INCOME

Having a job is a good start, but many people today are underemployed and most don’t have wages that keep pace with inflation. According to the Pew Charitable Trust Economic Mobility Project, the current generation does not earn as much money as the previous one did.

Pew compared the income of men now in their 30s to that of men who were in that age group 30 years ago. Looking at the most recent figures available, Pew’s survey shows that salaries for men in their 30s went up 5% from 1964 to 1994. But for the period 1974 to 2004, salaries actually went down 12%, from $40,210 to $35,010 (in inflation-adjusted dollars).

Income was actually on a bit of a downswing in the early 1980s, but was still higher than at any other point in recent history. In 1980, the average income for a man in his 30s was $39,109. In inflation-adjusted dollars, Pew estimates an average of $34,676 for 2008.

PERSONAL SAVINGS

How rich or poor you feel depends in part the amount of money you have left over after you’ve paid the bills. The Department of Commerce Bureau of Economic Analysis, calls this “personal savings” and expresses it as a percentage of disposable personal income. The Bureau’s most recent report shows that the personal savings rate is over 4%. That’s up from a record low of negative 0.7% in the third quarter of 2005. (A negative personal savings rate means that people are borrowing money to pay personal bills.) The high end of the scale of 12.2% in 1981.

HOME PRICES

According to the Federal Housing Finance Agency, home prices continued to fall in the first quarter of 2009. Price increases in January and February were offset by a decrease in March. The purchase-only house price index, calculated using home sales price information from Fannie Mae and Freddie Mac-acquired mortgages, was 0.5 percent lower on a seasonally-adjusted basis in the first quarter of 2009 than in the fourth quarter of 2008. This decline was much more modest than the 3.3 percent decline in the prior quarterly period. Over the past year, seasonally-adjusted prices fell 7.1 percent from the first quarter of 2008 to the first quarter of 2009.

The way your home looks from the outside can greatly add to its selling price.

One of the tests for when it’s OK to get short-term loans is whether they can actually help you  make money.

Now is a terrible time to have to sell your home, as values for housing have sunk so low. But life happens, and if getting short-term loans to fix up your house could push up your home’s selling price, it could be a good investment.

Almighty curb appeal

The best way to increase the amount you can get for your home is to start on the outside, according to CNNMoney.com.

If the siding on your home is worn or damaged, replacing it is a good first step. If taking out short-term loans to get your siding repaired quickly will get more buyers looking at your home sooner, it might be worth it.

Siding tips

According to a remodeling survey, fiber-cement siding is the best way to get your money’s worth and add value to your home. Also, if only a portion of your siding is in really bad shape, consider replacing just that part. If you can get away with patching and painting the rest, go for it.

Stack your deck

If  you live in a warm climate, adding a deck to your home will greatly increase its value. Eric Stalemark, a contractor and founder of Decks.com, says that cedar is the best wood to use for a deck based on durability and appearance.

Get rid of window pain

Sprucing up your yard is another way to add value to your home.

If your windows are rotting or not properly sealed, replacing them can start saving you money immediately and increase the value of your home at the same time.

Windows certified by the American Architectural Manufacturers Association and the National Fenestration Rating Council can cut heating and cooling costs up to 30 percent. Whatever you do, make sure your new windows match the rest of the house to ensure they will drive the price of your home up, not down.

If short-term loans can help you start saving on heating immediately, it might be worth it to start your project today.

As demand for payday loans continues to rise, demand for houses continues to fall.

Home prices are sinking lower and lower, and for some people that might make the “buy low” part of the old investment adage ring in their heads. However, MarketWatch has come up with a list of pretty compelling reasons why you shouldn’t buy a house in 2009. Here are a few.

Uncomfortable without a cushion

For any average American, the down payment on a house and other costs associated with buying will wipe out their savings account. MarketWatch argues that now is a dangerous time to be left without some extra cash.

“Given the recession and the fragile economy today … it’s wise to have a cushion to land on in the event you get hit with a financial broadside,” MarketWatch says.

You don’t want to end up needing payday loans in a financial emergency later because you spent your financial cushion.

Job insecurity

We have all seen the headlines every day announcing big layoffs at big companies as well as smaller ones. Perhaps you feel secure in your job because you are protected by a union contract or because the company you work for is doing well financially.

However, union contracts can change. As the recession deepens, more companies are being affected every day. Buying a home is an extremely long-term commitment. At this point not even experts know where the economy will be in a year or two years or even five years. Having a mortgage to pay off is not an ideal situation to be in if you lose your job.

Prices are still dropping

Home prices have been on the decline for some time now, but there is no sign of them leveling off yet. If you buy a home this year chances are it will depreciate even farther in value after you buy it. Granted, there is a good chance it will go back up later and you will end up making money in the long run. However, if you are looking at buying a home as an investment opportunity, it is best to wait  until prices are at their absolute lowest.

So don’t run out and get payday loans to cover your fees so you can shore up a mortgage; wait it out.

Amid record foreclosures, home prices continue to fall at record rates.

Homeowners who lost their homes or fell behind on mortgage payments may be comforted to know that no credit check payday loans can help them in times of financial crisis. However, homeowners who are still paying off their houses probably won’t like what I have to say next: The value of your home has fallen, and it is still going down.

Home prices in the U.S. broke records in November, when they fell 18.2 percent. That is the largest month-over-month  drop the U.S. housing market has seen.

A new reality

Composite data from cities that Standard and Poor has tracked show that home prices have fallen every month for 28 months. It used to be that homes represented good debt, meaning debt that would later create a profit or return on an investment. No credit check payday loans can represent a lucky break for people who have fallen victim to bad debt and gotten black marks on their credit reports.

However, now it seems that homes are in the same boat as cars: they drop in value as soon as you drive them off the lot. Or, in the case of homes, they drop in value as soon as  you sign the mortgage papers. Now would be a great time to buy a home in cash, but we all know that about 1 percent of the population has enough money to do that.

A little help

For homeowners who are in danger of foreclosure, there is a glimmer of hope. The Federal Reserve today adopted some new policies to prevent foreclosures. Specifically, the Fed will modify mortgages that were “rescued” from Bear Stearns Cos. and American International Group Inc.

For people with touchy credit who need to be rescued from overdrawing their bank accounts, no credit check payday loans can save the day.

History tries to repeat itself

The Federal Housing Authority says it doesn’t have the resources to police predatory lenders. Officials from the Department of Housing and Urban Development say the FHA needs more staff, better technology and added legal authority if it is going to stop another wave of shady lending practices from hitting the country.

The Troubled Asset Relief Program, which so far has spend $350 billion, was put in place to aid lenders by giving them federal funds. The FHA is charged with screening people who apply for bailout money or otherwise try to get involved with federally backed loans. However, recent examples have shown the FHA is ill-equipped to do so. Too bad a payday loan can’t help.

Finding ways around the law

The first example seems to be simply of slipping through the cracks. An FHA lender in New York was debarred five  years ago. That lender was somehow able to go back into the business, and it continued using the same fraudulent practices that got its license taken away in the first place.

A lending company in Arizona had its license suspended and then filed for bankruptcy. The company promptly resumed operations by putting the company under a different owner’s name.

Evaluating evaluators

The FHA isn’t just in charge of screening lenders. It is also responsible for screening appraisers, people who assign value to homes or property. Right now the government’s list of appraisers still names 199 who have been disciplined by the states. The list also includes 3,480 with expired licenses.

As home prices continue to fall and property taxes continue to rise, homeowners are challenging the appraisal value of their property. Appraisers are being overloaded with requests for re-evaluating a home’s worth. The more appraisers are hit up with these requests, the more bogged down the FHA will become.

Get on the right track

In my opinion, it is imperative that these organizations immediately get the staff and the technology they need in order to be able to properly screen requests for federal funds. Obama has requested access to the remaining $350 billion in TARP funds. If the FHA’s problems aren’t fixed before the government starts handing out money again, Americans will be vulnerable, once again, to predatory lending practices. And this time it’ll be our own government paying those shady lenders.

The first step toward fixing these problems comes with double benefits: Hire people! If some bailout money is used to pay more staff it will have the added affect of giving jobs to part of the 7.2 percent of the population that is unemployed right now. Add that to preventing more of the same mistakes that caused the mortgage crisis in the first place, and we have a winner. I think getting the proper technology for these organizations would be a worthy investment, as well.

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