Recession 2012: Is It Worth the Money to Remodel Your Home?

Remodeling a home is worth the financial commitment if homeowners anticipate a long-term return on investment. Any remodeling project – regardless of scope or necessity – most likely will not rescue an already distressed residential property from losing value over the near term. Too much uncertainty exists over the sustainability of the economic recovery in the U.S. and abroad as well.

Housing markets across the country continues to reel from the knockout blow dealt to the industry by the Great Recession of 2007-2009. Politicians on both sides of the political schism in America continue to decry the slow pace of the recovery, but the hard facts of the real estate industry as a whole indicate a much more optimistic reality. Existing homes sales are rising, and the median value of existing homes shows positive momentum, which bodes well for homeowners considering a home improvement project to raise the value of their properties.

The Health of the Housing Market by the Numbers: Increasing Sales and Prices in 2012

Professional organizations such as the National Association of Home Builders (NAHB) and the National Association of Realtors (NAR) have published updated statistics that strongly suggest a recovering housing market. These two industry insiders represent the foremost authorities on the health of the real estate industry in America.

The amount of homes sold in the U.S. over the last year must be properly contextualized in order to truly comprehend the reality facing homeowners over the next few years. Sales of existing homes have fared much better than new home sales since 2007. Approximately 5 million existing homes were sold in 2007, but a year later the number had plummeted to 4.1 million units sold, according to figures published by the NAHB. New home sales over the same time period dropped from 776,000 units to 485,000 units, over a 60 percent collapse.

Four years after this real estate catastrophe, existing home sales have climbed back to approximately 4.6 million units sold in April 2012. New homes sales, on the other hand, have continued to fall, achieving a mere 343,000 units sold. In other words, homeowners who anticipate selling soon sit in a far better position than four years ago. Existing home sales in 2012 have matched the highest level recorded since 2010.

The median price of existing homes shows a similar positive trend. The most recently published statistics show that the average price of existing homes rose to approximately $177,000. This jump represents a 10 percent rise from a year ago, according to the NAR. Simply stated, homes are gaining value again in the U.S., so homeowners interested in capitalizing on this positive trend should strongly consider financing a home improvement project soon.

Remodeling’s Return on Investment

Considering the facts mentioned above, remodeling is an intriguing proposition. Conventional wisdom says that on average remodeling projects recover between 75 percent and 90 percent of the initial investment. This figure is allegedly the average across the country, but millions of homeowners have been able to achieve a return on investment well over 100 percent.

Calculating the value of a remodeling project is an inexact science because homeowners cannot quantify the unique perceptions of a potential homebuyer. One buyer may fall in love with new cedar cladding, but the next buyer may see the improvement as more of a burden, considering the upkeep involved.

External factors beyond a homeowner’s control influence the market value of their home. Financing a home improvement project allows homeowners to increase leverage over potential homebuyers. Industry experts agree that remodeling projects gradually improve the value of a home over time, mirroring the average appreciation of a residential property.

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Emilio has built a reputation as a content marketing whiz and also has an intuitive understanding of consumer buying behaviors. This has allowed him to deliver great content for our readers, ensuring they get useful information and the help they are seeking for their projects.

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