by Broderick Perkins
© 2007 DeadlineNews.Com
Deadline Newsroom – Keep an eye out for home improvement bargains.
A national trend is pointing to more homeowners sitting on the fence over home improvements and that could mean it'll get easier to drive a hard bargain and negotiate to get more work done for less.
Homeowners are still bullish on home improvements, but with the brakes on appreciation and the squeeze on mortgage money, more and more homeowners are thinking twice about getting work completed.
Local contractors say stores of built up equity earned during the last housing boom is keeping the trend away from Silicon Valley, but that may not last.
"These days, my remodeling clients are a lot more cautious, deliberate
and circumspect about their remodeling goals and monetary outlays," said Clayton Nelson, a residential remodeling contractor/owner of Clayton Nelson & Associates in Los Gatos.
The Leading Indicator for Remodeling Activity (LIRA), at Harvard University's Joint Center for Housing Studies projects home improvement expenditures in 2007 will fall 2.3 percent compared to 2006.
By the second quarter of 2008, expenditures will be down 4.2 percent from the previous four quarters and the downturn is expected to continue further into 2008.
"The recent problems in credit markets are expected to dramatically reduce the level of cash-out mortgage refinancing activity," said Kermit Baker, director of the Remodeling Futures Program at Harvard's Joint Center.
"Given that equity withdrawals have been a key source of funding for home improvements, market spending is expected to suffer," he added.
Home improvements are always a good way to sustain and bolster a home's value in any market.
Seventy-four percent of consumers recently polled by Opinion Research Corporation said that making renovations or home improvements now will help them get the most money when they decide to sell.
Sixty-seven percent said they plan to initiate a home improvement in the next 12 month, but because they are pinching pennies, the majority plan to paint, rather than take on larger remodeling jobs.
The poll asked consumers where would renovations give them the most return and 63 percent of homeowners said a kitchen do-over while 51 percent said just buying new or refinished kitchen cabinets will add to resale value. Sixty-seven percent said painting the interior or exterior will add value. Other jobs frequently mentioned were bathroom remodels, 58 percent; new carpeting, 54 percent and new or refinished hardwood floors, 49 percent.
Dan Fritschen, Sunnyvale founder of the RemodelOrMove.com and RemodelEstimates.com Web sites said preliminary results from his Remodeling Sentiment Report, a semi-annual survey of 5,000 homeowners nationwide, shows a trend similar to Harvard's study.
Preliminary breakouts for Silicon Valley, however, "shows a divergence from
the national data," says Fritschen, also author of the book "Remodel or Move" (ABCD Publishing, $15.95).
"Silicon Valley is interested in the same types of projects as the national numbers as well as larger remodels, more than 20 percent of the home's value – but due to the increase in home prices in Silicon Valley, the wealth effect is still strong and Silicon Valley homeowners are not following the nation in finding ways to economize," said Fritschen.
That may not apply to all regions in Silicon Valley, including east, central and south San Jose, where prices and home values have fallen. Silicon Valley's median price is rising because sales in high-end homes have been a larger-than-normal slice of the sales pie this year.
As sales continue to plummet at record levels, even high end homes are likely to feel the pinch. A recent 12-page Goldman-Sachs report says California home prices are over-valued by 35 to 40 percent.
"As homeowners become increasingly concerned about falling house prices and a slowing economy, home improvement spending is dragging," said Nicolas P. Retsinas, director of the Joint Center for Housing Studies.
But in Silicon Valley, the tech money factor helps overcome equity loss for many, says Cindy A. Carey who, along with husband Phil operates San Jose-based Starburst Construction.
Market conditions aren't lost on Carey who says the company is marketing to increase exposure to current clients. However, the company continues to enjoy conditions unique to Silicon Valley.
"There are a lot of people in this valley who do not rely upon their home for home improvements. People in our area have a lot of opportunities, via stock options, bonuses and more to pay for their home improvements," Carey said.
• DeadlineNews.Com's Home Improvement Center
© 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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