The housing recovery: Good for home remodeling?

Posted by Jeffrey Anderson ~ August 26, 2013

It would appear that the long awaited housing recovery could finally be underway. The National Association of Home Builders (NAHB)/Wells Fargo builders' confidence report indicates growing optimism among residential builders with August's index level reaching a high not seen since 2005. According to a report on DailyFinance.com, housing starts are expected to exceed one million this year.

So what might this mean to homeowners planning a remodeling project during the remaining months of this year or the beginning of 2014? Well, the news is both good and bad.

How the housing recovery may affect your remodeling project

Depending on your location, you may already be seeing something that hasn't occurred in quite some time: activity on new home construction sites. Basements are being dug, foundations poured, and framing is being done in housing developments across the country. While it's great to see the residential construction industry rebounding, how might this sudden burst of activity affect your upcoming home improvement project?

The good news is that, at least for the moment, the supply of new and existing homes for sale doesn't seem to be enough to meet customer demand -- something that didn't seem possible just several years ago. During the time of the Great Recession, a house could languish on the market for months before being sold.

As anyone who took Economics 101 knows, when supply can't meet demand for an item, its value often starts to rise. This is beginning to be seen in many areas of the country where housing values and prices are finally inching up. And when they go up, the return on investment in any improvement done on the home usually does as well.

That means that you may get back a little more of the money spent on a kitchen remodeling project or new siding installation when your house is sold. Now the bad news: here are two reasons why the recovery could have an adverse effect on your home improvement project:

  • Scarcity of contractors -- As housing starts increase, builders are finding out there aren't enough qualified contractors to keep up. According to an article on CNNMoney.com, the NAHB is reporting that many of its members are unable to keep construction schedules due to a lack of skilled workers. You may be planning your remodeling around the availability of contractors.
  • Cost -- Just as housing values are increasing due to a lack of inventory, so may the cost to hire a contractor. A job that might have been about $300 several years ago when construction professionals were looking for work could soon cost quite a bit more.

The recovery should be good for the economy and the thousands of workers and vendors who were affected by the industry downturn. If house values continue to rise, the rebound should benefit just about any owner contemplating an improvement to their home as well. However, just remember that you may soon be paying a little more for a qualified contractor's services -- that is, if you can find one.

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