Home remodeling is at an all-time high, should you jump on the bandwagon?

Home remodeling spending hit an all-time low when the housing market crashed in 2008. It didn’t make financial sense to invest money into your home when the value of homes was dropping nationwide and many homeowners found themselves owing more on their mortgage than their homes were worth. Thankfully, those days are behind us and remodeling spending has been on the rise ever since. Fast forward to the end of 2016 and home remodeling spending is the highest it’s been since the recession and that trend is expected to continue.

In Southern California alone, homeowners have spent approximately $13 billion on home remodeling since the recession ended. In some counties, remodeling spending has risen by as much as 62% compared to remodeling spending during the lowest point of the recession.

With so many homeowners investing their money into their homes again, you may be wondering if it’s time to jump on the bandwagon. Of course the fear is that the moment you do, we’ll dip into another recession and there’ll be nothing to show for your investment into your home. Without boring you with all the details, a housing market crash like was seen in 2008 isn’t likely to occur again any time soon and a home remodel is a safe investment if you’re smart about choosing which projects to undertake. Here are some tips for doing it right.

Pay attention to Cost vs. Value reports

Every year Remodeling Magazine publishes a cost vs. value report which is the single best resource for homeowners considering a remodel. The report looks at dozens of the most popular remodeling projects and compares the average cost to the average return on investment (ROI) across more than a hundred regions. It’s good to consult the most recent report when considering a remodel to see which projects are the safest investments. One trend that has remained stable throughout the years is that the smaller projects tend to earn the best ROI. An up-scale kitchen remodel that costs tens of thousands of dollars might only recoup 60% of that cost at resale while a few hundred bucks spent repainting, replacing the siding, or installing baseboard radiator covers can recoup close to 100% of the cost, especially if you do the work yourself.

Financing your remodel

Ideally, you can afford to pay for your remodel out of pocket since that’s the safest option. After all, it was irresponsible borrowing paired with banks who were all too eager to offer risky loans that led to the recession in the first place. Many borrowers will borrow against their home’s equity in the form of a home equity line of credit (HELOC) or a second or even third mortgage to pay for remodeling. This should only be considered if you’re absolutely certain you can keep up with payments on these loans since you could lose your home if you fall too far behind.

A personal loan is the safer option if you need to borrow. The cost of borrowing will be higher but you’re not offering up the equity you have in your home as collateral.

Source: OC Register

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