Thanks to a slumping housing market, home renovation isn't as sure a thing to increase value as it once was. (Photo Credit: Public Domain/U.S. Army Africa/Flickr)

Remodeling to increase the value of a home has traditionally been a good idea. However, the housing market collapse has made big home renovation projects a calculated risk. In parts of the U.S. where the real estate market is more favorable, remodeling projects can still provide good value for the cost. SmartMoney has a few ideas about where to start if you’re looking to remodel your home.

Cooking up a tasteful kitchen remodel

Today, kitchen remodeling is a $12.6 billion industry. Since the lowest point of the housing bubble collapse in 2009, homeowners have spent an average of $27,300 on kitchen remodels, reports SmartMoney. That’s only 8 percent below the average cost at the height of the U.S. housing boom, says Harvard University’s Joint Center for Housing Studies, but there are ways to economize.

As demand has decreased during the recession, some cabinet manufacturers have cut out surcharges for custom work, decorative finishes and highest-quality wood. Don’t be afraid to ask, as it could save you 20 to 30 percent. Unfortunately, the same cannot be said for hand-painted tile, as there aren’t the kind of backlogs that would necessitate driving down prices. A major tip SmartMoney offers kitchen remodelers is not to source materials directly from manufacturers simply to save money. The potential for sizing error increases, which could force you to pay more for return shipping and repairs.

Clean up with a bathroom remodel

Even in a sluggish real estate market, studies indicate that bathroom remodelers recoup 53 percent of costs on average. Prices for high-quality granite have come down by as much as 50 percent since the housing boom years, in part because of increased competition from Asian and Brazilian rock quarries. Similarly, porcelain sinks are down in price by 50 percent because of increased Chinese import activity. Thus, high-end restroom remodeling projects aren’t out of the question.

A bathroom project that makes a lot of sense is a spa shower, suggests SmartMoney. With a shower tower kit, only one water hookup is required to deliver multiple streams of water. Just keep in mind that such kits aren’t adjustable, which can be a problem if people of different heights use the shower.

Backyard projects that sizzle

To target buyers who like backyard cookouts, there are remodeling projects that can increase your potential cash return at resell. Deluxe grills, pizza ovens, refrigerators, warming drawers, wine chillers and cabana roofs have sold well during the recession, says SmartMoney. Rising demand hasn’t affected the price much, experts say. Installation costs are down by as much as 20 percent because of the labor glut, and homeowners have found the recession has made it easier to haggle over landscaping costs.

A “hot tip” SmartMoney offers readers is to consider a gas fire pit instead of a masonry fireplace. Pits are often portable, which offers greater flexibility with décor. Not only that, but gas pits can cost thousands of dollars less.

Sources

Oprah

SmartMoney

Knowing when renovating your home is worth it

Construction spending is at historic lows, another consequence of a housing market that drags on economic recovery. Image: CC Garreth & MaryJ

For the past three months, construction spending — a key economic indicator — has been plummeting. The construction sector has gotten so weak that spending in February reached its lowest level since the fall of 1999. New home construction, dragged down by foreclosures and short sales, was even worse, dropping to the lowest level in recorded history.

Construction: February is the cruelest month

Builders broke ground on fewer homes, apartments and government projects in February than they have in more than a decade. Construction spending in February dropped 1.4 percent; it was the third straight month of decline. The seasonally adjusted annual rate of construction spending in February hit $760.8 billion, the weakest level since October of 1999. While other sectors of the U.S. economy have been showing signs of life, construction has been holding back a more robust economic recovery. Lingering effects of the recession, including depressed demand for commercial projects such as office buildings, hotels and shopping centers and tight lending standards, continue to cause problems for the construction sector. February construction activity fell to about half the $1.5 trillion level economists figure is needed for a healthy construction sector. It has been estimated that construction won’t recover from the housing bubble that triggered the recession for another four years.

New home construction burst along with housing bubble

Private residential construction fell 3.7 percent in February to an annualized rate of $228.5 billion. Single-family and multi-family construction both dropped due to a glut of unsold homes and record foreclosure levels. Until housing inventory can be cleared, new home construction will continue to languish. According to the National Association of Realtors, existing home sales fell about 3 percent in the last year, but new home sales have dropped 28 percent. In February alone, new home sales dropped 16.9 percent, from an annual rate of 301,000 to 250,000 — the lowest level since the government started tracking the numbers in 1963.

New home sales: no buyers, no builders

In the construction sector, new home sales drive the growth that affects the bottom line in GDP. But new home sales currently cost about 29 percent more on average than existing homes, about double what is considered normal, according to the National Association of Realtors. The existing home market continues to be devalued by foreclosures and short sales, which made up almost 40 percent of all home sales in February. Until the foreclosures on existing homes are cleared and the inventory of new homes falls, home builders have essentially taken a time-out. Before the recession, 80 percent of builders sought financing. According to the National Association of Home Builders, only 20 percent now are looking for construction loans.

Sources

Associated Press

MarketWatch

CNNMoney.com

Peter Schiff thinks home prices have a long way to fall. (Photo Credit: CC BY-ND/Libertarian Stoner)

While some people think now is a great time to buy a new home because interest rates are so low, there are experts who continue to advise caution. Euro Pacific Capital CEO Peter Schiff says home prices have not bottomed out yet. In a recent Wall Street Journal piece, he even goes so far as to suggest that home prices will fall at least 20.3 percent – and may drop even further.

Home prices must drop to come back to the trend

According to Peter Schiff, home prices must fall another 20.3 percent in order for the cyclical pattern to match the historical trend. However, he admits that even that won’t necessarily be the floor upon which plummeting home values crash. Considering that the U.S. has recently seen a negative Case-Shiller home price index, it’s clear that we’re in the middle of a housing double-dip. Marry that to other economic data on jobs, retail sales and industrial production and Edward Harrison of Credit Writedowns believes that while the U.S. may technically be in economic recovery, that recovery is weak at best.

The Fed is delaying the inevitable

The artificial means through which the Federal Reserve is attempting to prop up the housing market is at best a diversionary tactic, suggests Schiff. High levels of private and public debt – as well as the continually bleak job market – have clouded the economic picture for the U.S., and only by allowing economist-defined historic cycles to play out will the nation get out of trouble without further delay.

Peter Schiff’s view of home prices and the Case-Schiller is that even a 10-percent decrease beneath the 100-year trend line is reasonable over the next five years, even if mortgage rates rise back to customary levels. Even cutting the decrease in half (to 5 percent) would be welcome. Ultimately, Schiff believes that when rates stay low, the dips will be smaller, yet inflation will rise.

Some say buy now

Despite Peter Schiff’s warning that home prices are going to fall significantly, some believe the grass is greener on the other side. Hedge fund manager Bill Ackman says ignore the naysayers, because houses are now “a screaming buy.” Ackman says that low interest rates, the already significant value loss and cheap government loans are reason enough.

Sources

Business Insider

Credit Writedowns

Wall Street Journal

Schiff doesn’t think the dollar is in a good place, either

http://www.youtube.com/watch?v=pQ34p8MBf2E

Higher down payments on mortgage loans are one of many reforms experts say the federal government continues to avoid. Image: Thinkstock

Weak lending standards created the housing bubble; that led to the the housing crisis, which in turn led to the foreclosure epidemic. But experts, including the chairman of the Federal Deposit Insurance Corporation (FDIC), are saying the federal government has yet to learn the lesson. An amendment calling for adequate down payments for mortgages was defeated during the financial reform debate. Federal housing agencies project a return to subprime lending. And the crisis is being perpetuated by the Federal Reserve, with policies that prevent a natural correction that is the ultimate solution to the problem.

Skin in the game vs. loan performance

Federal regulators should tighten lending rules for home mortgages in the U.S., according to Sheila Bair, chairman of the FDIC. Bair told CNBC that a new set of “common sense” rules need to be written ensuring the borrower has the capacity to repay a mortgage loan and makes a larger down payment than is currently required. She said there was a strong correlation between “skin in the game” and loan performance. The more money down a borrower is required to pay, the less likely they will be to walk away from the house. Going forward from the housing crisis, Bair said lending standards need to call for strict income documentation, higher ability to repay standards and more skin in the game.

Subprime lending redux

Weak lending standards brought down the economy, but the federal government still doesn’t get it, according to Edward Pinto at Bloomberg. Pinto writes that the Dodd-Frank bill signed into law last July makes it clear that Congress and the Obama administration don’t intend to fix broken underwriting. An amendment to the financial reform bill that would have added a minimum down-payment requirement as well as consideration of credit history, along with definition of a “prudent underwriting” standard, was defeated. Plus, in early September, the Federal Housing Finance Agency finalized affordable housing mandates that focus nearly exclusively on low income borrowers with low credit scores — subprime lending redux. Pinto said the new policies are riskier than those resulting in the Fannie Mae and Freddie Mac taxpayer bailout.

Ignoring problems won’t make them go away

The current government response to the housing crisis will extend today’s problems into the future, according to Bill Bonner at the Christian Science Monitor. Bonner writes that the government continues to extend credit and cash to those who don’t deserve it and pretends there is no more problem. The U.S. financial system is holding hundreds of billions in mortgage debt that won’t be repaid. So the Federal Reserve bought up the bad mortgage debt and called it an “asset.” Bonner said the real solution is the market correction the government is trying to avoid. The government finances more mistakes, keeps paying for the old mistakes and pretends that everything will be fine–until it finally runs out of money.

McMansions are out as homebuyers seek smaller, more practical homes in the aftermath of the housing crisis. lisachamberlain/flickr photo.

McMansions are out. Count this symbol of American excess, waste and poor taste as another casualty of the housing crisis. New research is showing that large, rambling, expensive homes packed close together in cul de sacs have fallen from grace. Some McMansions that were thrown up in haste by greedy builders in the past few years lie abandoned. Others looming large and out of place with the houses around them are considered a blight on neighborhoods. People building new homes are opting for much smaller floorplans. Realtors and architects believe the sentiment that McMansions are out  is more than just a passing real estate trend.

Housing bubble bursts the McMansions era

McMansions — also known as “starter castles,” garage mahals and faux chateaus — may have reached their peak during the housing bubble. Now that the housing bubble has burst, the decline of McMansions could be permanent. Time reports that Trulia has released a report on real estate trends that said the average square footage of an American home is decreasing for the first time in 60 years. The average size of a home in America was 983 square feet in 1950, according to Trulia’s American Dream Survey. By 2004 the average had swelled to 2,349 square feet. Another study, the Truila-Harris interactive survey, found that only 9 percent of people polled were looking for homes of at least 3,000 square feet that are considered McMansions. A majority of the housing market, 64 percent of buyers, sought homes from 800-2,000 square feet.

McMansions a symbol of ugly America

A McMansion, according to Wikepedia, is a large new house considered pretentious, tasteless or designed out of character with its neighborhood. The term compares these bland homes often built with substandard construction and lack of style to mass-produced meals. McMansions typically have a floor plan covering more than 3,000 square feet, ceilings 9-10 feet high, at least a three-car garage and numerous bedrooms and bathrooms. The house takes up most of the lot, leaving little room for a yard or garden.

Housing market comes to its senses

People in the housing industry think the downsizing trend in the housing market is here to stay. Pete Flint of Trulia told CNBC that smaller square footage is a long term effect. In a survey of builders last year, nine out of 10 said they planned to build smaller or lower-priced homes. Kermit Baker, the chief economist at the American Institute of Architects, told CNBC his profession is moving away from the McMansion era as homeowners demand more practical designs. Paul Bishop, vice president of research for the National Association of Realtors, told CNBC that McMansions look and feel out of place in the aftermath of the recession.

Click Above To Check Out The Free Property Look Up Calculator Now!

The housing bubble has burst, and things are difficult for scores of homeowners nationwide. According to MSNBC.com, a direct result of the real estate market crash is that up to 60 percent of America’s taxable property may be over-assessed. Owners of such over-valued properties are paying thousands of dollars more on their property taxes than they should, based on these inflated assessments. It is an outrage that many consumers begrudgingly accept – yet it doesn’t have to be that way. With the easy, inexpensive assistance of LowerMyAssessment.com, homeowners can prepare a professional-quality property tax assessment appeal that can save big money on property taxes.

If your property is over-assessed, go to LowerMyAssessment.com

The real estate crash and subsequent recession have made the need for accurate tax-assessed valuations more important than ever for financially conscious consumers, and LowerMyAssessment.com can help. Jacqueline Byers, director of research for the National Association of Counties in Washington, D.C., told the Wall Street Journal that “If you have a three-year period between assessments and the last one was in 2007, your assessment is still at the top of the market.” That may no longer be accurate and mistakes are often made, reports Bankrate.com. With LowerMyAssessment.com, homeowners can challenge their outdated or inaccurate assessment.

Why make it more difficult and more expensive than necessary?

A property tax assessment appeal involves a detailed filing process with very specific time windows (as small as two weeks in some areas). It can be a dauntingly complicated task to undertake alone. Hiring your own property tax attorney or real estate appraiser costs several hundred dollars, if not more. With LowerMyAssessment.com, the process is not only simpler, it is much less expensive. Start with the free online calculator and you’ll know immediately whether you qualify for an appeal. No personal information is needed until you agree to use the LowerMyAssessment.com program.

Three ways to lower your property taxes

Upon qualification, LowerMyAssessment.com offers you the following three levels of service:

• Basic $39.95 – LMA provides the necessary valuation data in the form of a Fair Value Report. The included appraisal is adjusted to the correct “as of” date, depending upon codes for the county in which the property is located. All you have to do is complete the appeal form
• Deluxe $79.95 – The appropriate official property tax assessment appeal forms for your county are completed by LMA and delivered to you with the above Fair Value Report. Envelope and label are ready; all you have to do is mail it to your local property tax authority
• Premier $299.95 – If you own a higher-value residence or rental property, LMA makes arrangements for a local professional appraiser to prepare a custom report for your property. All reports and forms from the above plans are included

Buying your way into a property tax appeal win is unnecessary

Why spend thousands of dollars on a property tax attorney? LowerMyAssessment.com can do the job for as little as $39.95, saving you both time and money. With the Deluxe and Premier packages, all you have to do is sign, affix a stamp to the envelope and mail the appeal form. It’s that simple. If you have any additional questions, contact LowerMyAssessment.com via email or their contact form. Via phone, fax and postal mail, contact the company as follows:

Toll-free: 877-908-7191
Fax: 877-938-1942
Mail: P.O. Box 36567, Lynnwood, Wash. 98036

Sources:

Bankrate.com
LowerMyAssessment.com
MSNBC.com Real Estate
Wall Street Journal

February home sales are up, but remember it could just be a reflection of a new housing bubble. (Photo: ThinkStock)

Plenty of Real Estate experts have gone on record that a new housing bubble is forming, but others view increased February home sales numbers for the U.S. as a positive sign that the market is surging again. According to the National Association of Realtors, home sales in February 2010 rose 8.2 percent. Analysts had expected sales to continue to flat line, as credit for too many today is limited to the payday loan. This was in spite of the tax credit for home buyers. The tax credit was among the driving forces for sales increases in fall 2009, but the New York Times says that it has been a lesser force this spring.

Do February home sales equal a second surge?

National Association of Realtors Chief Economist Lawrence Yun says it is possible. A second Real Estate market surge would go a long way toward stabilizing home prices, placing that market very much on the same track as U.S. employment, where the service sector has been shown to be experiencing resurgence, even if it still has some distance to go before it reaches the break even point. The Institute for Supply Management also indicates that non-manufacturing jobs and exports are on the rise. Yet this does not take into account the perpetually “underemployed,” who have difficulty making ends meet and rely upon occasional payday loans.

February home sales: Good news for dark times

Let’s be clear about this: the increase in February home sales is all relative, for the U.S. Real Estate market is still in a deep rut. Foreclosures are still on the rise. Yet the February home sales report is a glimmer of hope. Areas of the country that experienced bad weather even showed an uptick; according to the Times, the Northeast and South – areas hard-hit by snow this winter – showed a nine percent increase in sales.

Related Video:

Make a wish that the Case-Shiller index isn't a sign that another housing bubble awaits.

So America has recovered from the housing bubble and things are looking better for Real Estate… right?

Not so fast. Marketwatch reports that the most recent Case-Shiller home price index indicates a “not-seasonally adjusted” .2 percent drop for 20 major American cities for December 2009. Prices did rise in a bit of a quick payday for Los Angeles, San Diego, Phoenix and Las Vegas, however. And if you do adjust for the season, prices actually rose .3 percent that month. Perhaps it’s like the math used to depict the actual unemployment percentage in America?

We’re decaying, just not as fast

“The pace of deterioration has stabilized for now,” David Blitzer of Standard & Poor’s tells Marketwatch. “However, the rate of improvement seen during the summer of 2009 has not been sustained.” Over the past year, sources indicate the average national home prices have dropped 2.5 percent.

Home prices decay and so do our budgets

There will always be the obvious connection between a drop in personal wealth and falling home prices. This is because a home is typically the most valuable asset a person has in their financial arsenal. The housing bubble’s bursting put many people in saving mode when the nation needed them to continue spending. Prices, according to the Case-Shiller index, are currently at summer 2003 levels.

That’s good, so long as we aren’t creating another bubble

Joshua Shapiro of MFR Inc. tells Marketwatch we should still be worried. It could be that the homeowner tax credit is propping up the positive signals on the Case-Shiller index. More foreclosures could be on the way. “While much of the impact of the sub-prime disaster on prices at the bottom end of the market may well be behind us, there is likely more pain to come further up the price spectrum,” Shapiro said.

Is Congress creating a new housing bubble?

There are numerous economists who see just such a disaster on the horizon. Quick payday, if artificially induced here, could be a smokescreen. It’s still a good idea to be careful out there when it comes to buying, I think.

Related Video: