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Safe bets for remodeling: energy efficiency upgrades

Posted by Woodrow Aames ~ November 5, 2011

The housing remodeling market is poised for a rebound, according to researchers at Harvard University. In the next few years, spending on home improvements is expected to increase at a 3.5 percent annual average rate. Harvard's researchers also predict that trends wherein "deferred maintenance" and remodeling plans over the recession years will finally get back on track.

Harvard's Joint Center for Housing (JCHS) says remodeling toward energy efficiency is attributable to "lower household mobility" in the depressed marketplace. Translation: You're stuck with the place for now; you might as well make it a more affordable place to live.

The drop in home improvement spending fell by 20 percent after its peak in 2007, according to JCHS. Harvard says projects with long-term paybacks like energy efficiency retrofitting should become more attractive to homeowners.

Remodeling trending toward slow improvement

Tools of the Trade last month said to expect the rebound to stall until the second half of 2012. In the first quarter of the new year, you might even see a four percent decline in activity while the economic freeze begins to thaw. As owners perform energy upgrades or winterize homes there may be a brief spending bump, but it will probably take months to witness sustained progress.

A hefty burden against remodeling is the sense that additions or improvements won't add much equity in the current marketplace. Even an updated bathroom may bring negligible returns. Consumer confidence may be at a modern low. A genuine improvement in the housing market and economy in general may do wonders to spark upward trends.

JCHS researcher Kermit Baker told Remodeling Magazine in October that, "It's weak enough that the noise sort of dominates from what the trend is. Our indicators tell us that the trend is flat when we were hoping there would be a more clear sense of a recovery."

Small is the new large

Upscale additions and high-end kitchens and baths that were the rage before the economic plunge now are seen as entirely inappropriate, Baker adds. Now with a depressed market where older, smaller homes make more economic sense to buyers than new and grandiose ones, people are shopping for residences that offer right-sized, financially prudent living costs.

Add to the picture the grim outlook for current financing and you'll see how much inertia there is against a powerful, quick rebound. Today's tip is to be smart, think green, and take baby steps until at least the second half of 2012.

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