Home Improvement Loan Demand Shifts Along With Housing Market
Lillian Margolis of Andover, Mass., didn’t always have the perfect home.
In fact, there were eight inches of water in the basement after she bought it in 1981 for $129,000. She’s undergone three major home remodeling projects, expanding the living space by 600 square feet.
And while Margolis has no intentions of selling the home, she believes she could recoup her approximate $430,000 in home improvement costs - made possible via various home equity loans - at resale.
“I love how this house is married to the land,” Margolis, 73, told the Lawrence (Mass.) Eagle-Tribune. “Before, I was isolated. I couldn’t see anybody. Now, I can see everything. It took a lot of time to make this house the way it is. It was certainly a labor of love.”
Traditionally, home improvement projects have been a great way to increase your home’s resale value. This is no secret, as homeowners spent roughly $168 billion on home improvements and repairs in 2006, according to the Joint Center for Housing Studies at Harvard University.
Homeowners hoping to take advantage and cash in on a sizzling Massachusetts housing market focused on high-end projects, like new master suites, during the last five years.
But now that Massachusetts mortgage costs have soared and demand cooled, homeowners are more focused on modest home improvement projects that won’t price out potential buyers, said Kermit Baker, director of the Remodeling Futures Program at the Harvard center.
The truth is, you’re unlikely to recoup a remodeling project’s entire cost in today’s market. Price tags rose for most projects in 2006 while their resale value dropped back down to 2002 levels, according to Remodeling Magazine’s 19th annual Cost vs. Value Report.
But keep in mind that resale value isn’t always measured monetarily. You might spend $65,000 on an addition and increase the home’s value by just $50,000. But if it takes you three fewer months to sell the house, that time saved is also worth something.
When you plan to sell should factor into your project selection process. If you want to move homes this spring, simple improvements to the home’s electrical system or storage areas would attract buyers without making the house cost more than they can afford.
Keeping the house updated through small cosmetic improvements can result in getting $20,000 more at closing time, said Andover real estate agent Susan Papalia.
Also, it’s important to note that improvements that make your home more marketable can be as simple as cleaning up and decluttering.
“Your closets shouldn’t be overrun with stuff inside. If they looks neat and organized, buyers think, ‘There’s plenty of room in here,’” said professional organizer Jessica O’Leary of Derry, N.H. “It’s amazing how keeping things picked up really goes a long way.”
If you’d like to sell in a few years when the market is likely to regain at least some of its strength, think about using your home improvement loan for a larger project, like remodeling a bathroom.
A project designed for mass appeal will add value to your house in the long run, but more importantly, it will increase the quality of your daily life until then, Baker said.
“Home is a priority for me,” stated Andover resident Cathy Lloyd. “I love being home and love entertaining others in my home. Plus, I do believe that whenever we sell, depending on market conditions, mortgage rates, etc., we will get back some if not all of our investment.”
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