Realtors Help Consumers Remodel With An Eye Toward Resale

WASHINGTON (December 21, 2005) – Kitchen and bathroom remodeling projects are returning more of a homeowner’s investment than ever before, according to the 2005 Cost vs. Value Report published by the National Association of Realtors in REALTOR® Magazine and by Hanley Wood LLC in Remodeling magazine. Many homeowners who complete midrange bathroom remodels can expect to make money; the cost on a national average for this project is $10,499, and the return is $10,727, or 102.2 percent, compared with 87.5 percent in 2002. On average, major midrange kitchen remodels cost $43,862 and return $39,920, or 91 percent of the costs to remodel, up from 66 percent in 2002. Nationally, homeowners who add an attic bedroom spend an average of $39,188, and on resale, they recoup 93.5 percent of the cost. Master suites, however, do not fare as well; an upscale addition, which costs $137,891 on average, returns only $110,512 on resale, or approximately 80.1 percent of the remodeling expense.The Cost vs. Value Report includes information provided by NAR members about the resale value of common remodeling projects in 58 U.S. housing markets. The report includes cost data, resale value and percentage recouped at sale for 18 projects, including a first this year: a home office remodel. Given that America’s homeowners spent more than $139 billion on home improvements and repairs over the past year, according to data from Harvard’s Joint Center for Housing Studies, the report contains valuable information for anyone who is considering embarking upon a remodeling project. “Realtors® have industry expertise that goes beyond the initial real estate transaction,” said 2006 NAR President Thomas M. Stevens, senior vice president of NRT Inc., from Vienna, Va. “Our members’ experience and familiarity with the communities in which they work make them valuable resources. They understand what makes a good home investment, whether their clients are buying, selling or remodeling. Realtors® not only sell housing; we also build communities.”The desirability of different remodeling projects varies by region and metropolitan area. In the West, window replacements are highly valued, perhaps due in part to insulation and cooling concerns in desert regions, with nearly 103 percent of costs recouped on sale. Westerners also prefer remodeled kitchens and basements; in this region, for example, a minor midrange kitchen remodel may return 112.3 percent, and a basement remodel is estimated to return 108 percent. In the Midwest, however, the same kitchen and basement projects return only 85 and 73 percent, respectively. Midwest buyers appreciate homes with updated siding; midrange and upscale siding replacements return 96 and 98 percent of the project costs, respectively. Siding replacement projects fared well at resale in all four regions, likely because new siding is a relatively inexpensive way to update and refresh a home’s curb appeal.Buyers in the South are partial to upscale bathrooms, which return an average of 98.5 percent of project costs. When considering resale value, however, Southerners may want to think twice about midrange window replacements; this improvement, which is so popular in the West, only returns an average of 83.7 percent of project costs in the South.In the East, a midrange attic bedroom addition returns an average of 98.1 percent at resale, but a home office remodel only returns 75 percent. In fact, remodeling projects that involved home offices were among the lowest returns on investment across all four regions. “Local and regional differences in the resale value of remodeling projects are not surprising – the desirability of certain home features varies by neighborhood and is heavily influenced by buyers’ expectations in a given area,” said Stevens. “For example, adding a bathroom to a one-bathroom house in a neighborhood where most homes already have two may not return as much as remodeling an outdated bathroom in that same community.”In the final analysis, however, homeowners who are thinking about a remodeling project should consider their own needs and desires as well as those of the home’s future inhabitants. “Keeping up with the Joneses can be a savvy investment move,” said Stacey Moncrieff, editor, REALTOR Magazine. “But ultimately, the best reason for a remodel is to enjoy it.”

A Member of The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Whats hot and whats not for 2006

What features will homebuyers be looking for in 2006? Based on his experiences with buyers over the past year, Chicago real estate broker and author Mark Nash offers a list on Realty Times today. Quality kitchen cabinets, high-powered phone lines, usable outdoor space, dog parks, and sellers who pay at least part of the closing costs are among the "in" items, while single-rod closets, wallpaper, small windows, and property flipping are out. In general, Nash says, "quality and durability out sell trendy any day in residential real estate."

Email me for the list
rigneyrealty@comcast.net

December 21 2005

(image placeholder)December 21, 2005
Anticipating the 2006 housing market
The end is near for 2005, which means that everyone is trying to predict what will happen to the housing market in 2006. In its 2006 Investor's Guide, Fortune warns that the coming months won't be as kind to housing as 2005 was: "At some point in the next two years...a third of the nation's 100 largest metro areas (accounting for 60% of the U.S. population) are expected to see modestly falling house prices." The magazine's list of the top 100 real estate markets shows cities in the South fairing best in 2006, while California and Las Vegas are expected to not do as well. Business Week, meanwhile, recommends that homeowners not put too much money into renovations if they intend to trade up soon, but to invest in other segments of the real estate market instead. Hotel and apartment REITs and rental housing "in the heartland" are the best bets for good returns, according to BW. But for most people with a vested interest in the real estate market, the Seattle Times may have the best advice: become an armchair economist. Watch your own neighborhood for signs of what to expect in 2006: "Are houses staying on the market longer? Are sellers getting their asking price? That's an indicator of whether housing continues to boom, simmers or goes flat."

Why We Can't Compromise on the Mortgage Interest Deduction

Housing is the engine that drives this economy, and to even mention reducing the tax benefits of homeownership could endanger property values. Home prices, particularly in high cost areas, could decline 15 percent if the recommendation to convert the mortgage interest deduction to a tax credit gets implemented. That means about a $20,000 to $30,000 reduction in housing equity for a typical homeowner.
The Tax Reform Act of 1986 proved that when the tax benefits associated with real estate ownership are curtailed, the value of real estate declines. In this case, the resulting loss of value in the commercial real estate sector was 30 percent.
The current cap permitting deductions of the interest paid on mortgages of up to $1 million has not been modified or indexed since it was adopted in 1987. I am surprised that the panel would even consider reducing the cap. Basing the cap on complex regional loan limit calculations makes no sense. In California alone, more than a dozen Federal Housing Administration (FHA) limits are in effect in various parts of the state.
Eliminating the mortgage interest deduction would hurt middle-income families the most. According to IRS tax return data from 2003, 52 percent of the families who claim the mortgage interest deduction have household incomes between $60,000 and $200,000.
NAR is waiting to take an official position until the President's Advisory Panel on Federal Tax Reform makes an official recommendation. However, we're concerned that the commission is putting housing on the cutting block.

Thank you,
David Rigney
"David delivers the American dream"
Professional Realtor® in the Chicagoland Area
24 Hour Real Estate Info. Line: 1.800.731.1162
Direct: 847.732.7436
Fax: 847.625.9371
American Realty Services, Inc.

Housing Price Futures Contracts to launch on Chicago Merc

Real Estate In Chiago Land Area

Home Price Analysis for Chicago
By the Research Division of the National Association of REALTORS®
Executive Summary
With home prices rising strongly in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust. A thorough analysis of the Chicago metro market, as detailed below, reveals that there is very little danger of this. In fact, the local housing market is in excellent shape with a potential for significant housing equity gains, particularly for homebuyers who plan to remain in their house for the long run.
Because prices have risen faster than income, the ratio of price-to-income is currently above the historical norm. This measure is frequently cited to imply that there is a housing market bubble. But this ratio is a misleading measure in assessing bubble prospects. A more relevant measure is the mortgage servicing cost relative to income. This ratio is only minimally higher than the local historical average. It implies no widespread financial overstretching to purchase a home in the region.
Chicago Price Activity Current Appreciation8% Modest 3-year Appreciation 29% Strong

Price Activity
• The current price of $263,600 is about 30% above the national average.
• The median home price rose 9.6% in 2004 and 29% in the past three years.
• Home price growth has been weak throughout the 1990s. So part of the recent increase is attributable to the "catch-up" effect.
• Chicago home prices are one of the most affordable among large metro markets.