No Recession in Home Remodeling

CU360
January 22, 2010 | COMMENTS

What do you get when you combine low interest rates with cheap labor and materials? The answer is taking place across the country: a remodeling boom.

Despite the troubled economy, many homeowners are taking advantage of exceptional market conditions. Last year's federal stimulus package also included funds directed at energy conservation, which is expected to mean more weatherization and energy-efficiency projects, according to MortgageLoan.com.

Americans, of course, are still feeling the effects of the economic meltdown. Many are unemployed or working reduced hours; many carry substantial debt. For the more prudent money managers, however, this is an ideal time to remodel, so long as they meet two conditions: they must have cash or home equity, and they must have a steady revenue stream.

Applicants with home equity must also have good credit to qualify for a loan. If they didn't overextend themselves in years past, low interest rates make it a good time to borrow.

Combine those low rates with inexpensive materials and homebuilders who are eager for business, and consumers have an ideal remodeling market. Cheap goods come courtesy of the slumping economy, as retailers mark down building materials. Savings can be significant—10% to 20% or more off prices compared to a year ago.

Labor is also available at costs lower than a year or two ago. Home remodeling companies might be busy, but they're feeling intense competition from builders eager to enter the remodeling market as new-home sales remain stagnant. As a result, builders are slashing costs and taking on smaller jobs, creating opportunities for homeowners.

A changing market

The types of home remodeling projects have also changed, trending away from the major home makeovers that were the norm a few years ago. Homeowners are becoming more mindful of the size of the projects, with smaller, more practical renovations taking center stage.

Expect the remodeling effort to continue if current economic conditions persist, says MortgageLoan.com. Since many homeowners no longer possess the home equity to move to bigger houses, some will turn their efforts to improving their current residences.