At long last, housing is helping the U.S. economy. More new homes are going up, the prices of existing homes are going up too -- more than 7 percent last year, according to the Case-Shiller Index, and it could be even more this year. Builders and roofers and window-installers and home-improvement stores are all hiring.
And in many markets this spring, homes are selling again, fast -- multiple offers, sometimes at or above the asking price. At least -- if it’s a nice house, not in default or foreclosure, and spiffed up for sale.
So, what’s worth fixing up, and what’s just as well left alone, to get a deal done in this changing market?
Real estate broker Chris Suarez at Keller Williams in Portland, Ore., has been showing a $425,000 Victorian townhouse in an upscale urban neighborhood full of boutiques and brewpubs. The owner spent thousands on improvements over several years: a new gas fireplace, baby nursery, wine-nook in the finished basement.
That’s a change, says Suarez. “Two and three years ago, I was recommending ‘don’t put money into your home,’” he says. “If you’re in a situation where you need to sell and it’s the right thing for you to do, then let’s try to get as much equity out as we possibly can.”
But Suarez says in many markets, investing in home improvements does make sense now.
The reason? Home prices are rising again. And more and more homeowners who had been on the sidelines, are finally deciding to sell. Suarez says you want your house to be in better condition than the one down the block with a ‘For Sale’ sign.
“It’s more a condition war,” says Suarez. “You’re putting in that money so that you show up well, based on what other product is out there in the market.”
Michael Farr, chief investment officer at Farr, Miller and Washington, follows the housing and home-improvement sectors. He says the challenge for homeowners now is to figure out which improvements to plough their cash into.
“You don’t want to try and repair a house that’s simply falling in market value,” says Farr. “People want to know if they invest more money in their homes to repair or refurbish, that they’re going to be able to get that money out, that it’s going to be worth it.”
And it turns out there is a way to figure out what’s ‘worth it.’ It’s called the Cost Value Report, published annually in Remodeling magazine.
It can tell you how much you’re likely to recover at sale time if you put in a really upscale kitchen for $100,000 or more, versus a no-frills one at half the price.
Sunrooms, home offices and bathroom additions get the lowest return -- often less than 50 percent of the remodeling cost. The biggest bang for the buck comes from improvements that increase curb appeal: a remodeled entryway, new garage door, new siding or exterior paint. Those upgrades matter even more in a market where potential buyers surf the web and see online listings -- along with Google street-views -- first, before they ever drive past your property or get inside for a look-around.
Here’s the catch though: you’re not ever likely to get back 100 percent of what you put in, when you sell.
But realtor Chris Suarez points out: your house isn’t just an asset that you’re going to sell, eventually. You have to live in it now. “Sometimes -- and this is the unfortunate part," he says, "a seller does everything weeks before they put it on the market, when then they realize that they’ve really never gotten to enjoy it."
When you are ready to sell, though, it’s best not to do renovations out of ‘house-love,’ says Justin Riordan of Spade and Archer Design in Portland. He stages homes for sale.
“The idea of doing a bathroom the way you would want it to be done? You should never do that,” says Riordan. “Because, of all the people in the world that might buy your house -- you are not one of them.”
Riordan’s firm will completely furnish and decorate a vacant property, like the $800,000 mid-century colonial where I met him in Irvington, a neighborhood of grand old homes in one of Portland’s most fashionable residential districts.
In this case, Riordan’s decorating touches included an expensive-looking living room set, paintings, Art Deco glassware, vintage ice skates on the mantelpiece.
Riordan has made a study of home-buyer behavior -- he’s sort of a pop real-estate psychologist.
“Buyers are in a condition I call ‘buyer stupid,’” he says. “I was in that state when I bought my house. They’re leading their own life, they’re trying to sell their house, they’re raising their kids. They have the attention span of a gnat. If there’s one thing that pulls their emotional attention away from that house, we’ve lost them. We have five to seven minutes to win them over. And basically all we’re trying to keep them from doing is saying ‘no.’”
Here are more of Riordan’s Rules for getting to yes: Don’t leave out any prescription drugs, alcohol, firearms, political posters. No fur -- live or stuffed. No strong smells, or personal photos of any kind, or mirrors on the ceiling.
“Number one, the house has to be light,” he continues. “Nobody ever walks into a house and says, ‘I love this house, I just wish they had more window coverings.’ They’ll definitely walk in and say ‘This house is dark, we’re out of here...'”