Equity-Saving Home Improvements

by Broderick Perkins
© 2007 DeadlineNews.Com

Deadline Newsroom - Housing market conditions are squeezing the equity out of homes, but the right home improvement on the right home can help shore up equity and even improve the home's value.

That could mean a higher price when it's time to sell.

The Federal Reserve's third quarter 2007 U.S. Flow of Funds Accounts report says the amount of equity homeowners nationwide hold in their homes slipped in the third quarter to just over 50 percent, the lowest level on record.

Falling home prices, a surge in cash-out refinances, home equity loans and the increase in low- and no-down payment loans from the past housing boom have contributed to deteriorating home equity.

Economists say the equity-holding share could drop below 50 percent by the end of this year, due a soft housing market.

However, homeowners who perform improvements that bring their home up to par with other homes in the neighborhood -- or make them slightly above par -- stand the best chance of holding onto equity and even increasing home value.

"Upgrading what you have in your home now will always gain you something, either enjoyment and a return on your investment or a quick turn-around in the market," says Cindy A. Carey, co-owner of Starburst Construction Co. in San Jose.

That's especially true if homeowners perform home improvements that provide the greatest cost-vs-value return for the money and Hanley Wood's Cost vs. Value 2007 report helps take the guess work out of deciding which job provides the most return.

Here's a look at the top cost-vs-value jobs in the report's tri-state Pacific Region. The numbers are not absolutes. Do not overlook the impact your local community or neighborhood market conditions have on home improvements' value.

Each brief job description includes: 1) the Pacific region's average cost for the job, 2) the region's average dollar amount added to your home's value and 3) a percentage that represents how much of your original expenditure is returned to you in the form of increased value.

• Wood deck addition: A 16-by-20-foot deck using pressure-treated joists supported by 4x4 posts anchored to concrete piers, including a built-in bench and planter of the same decking material, stairs, and railings, $12,812; $13,836; 108 percent.

• Minor kitchen remodel: Updating a 200-square-foot kitchen with 30 linear feet of cabinetry and countertops. New cabinet and drawer prefacing; energy-efficient wall oven and cooktop; laminate countertops; mid-priced sink and faucet. Repaint trim, add wall covering, new flooring, $22,698; $23,494; 103.5 percent.

• Wood framed window replacement: Replace 10 existing 3-by-5-foot double-hung windows with insulated wood replacement windows, $13,120; $13,497; 102.9 percent.

• Vinyl window replacement: Replace 10 existing 3-by-5-foot double-hung windows with insulated vinyl replacement windows, $12,164; $11,978; 98.5 percent.

• Attic bedroom remodel: Convert unfinished attic space to a 15-by-15-foot bedroom with 5-by-7-foot bath with shower. Include a 15-foot shed dormer, four new windows, closet space under the eaves, more, $55,306; $54,186; 98 percent.

• A basement remodel, bathroom remodel and major kitchen remodel all returned, to the value of the home, more than 96 percent of the money spent.

Jobs including full additions, a new roof, siding and a home office remodel all returned about 90 percent or less.

"A sure fire return is on any green improvements in the home's energy performance. From here on out, home buyers will be likely to purchase the remodeled home that has included these energy savings improvements," said Clayton Nelson, a residential remodeling contractor and owner of Clayton Nelson & Associates in Los Gatos.

Hanley Wood concedes, for any project, the true cost-vs-value depends upon a host of factors -- the condition of the rest of the house, the value of nearby similar homes, the rate of local property value changes, the urban, suburban, or rural setting, the new home market and more.

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© 2007 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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