In the fashion world, they say pink is the new black. Well in home improvement, small is in and big is out. Large $100,000 kitchen remodels, 1,000 square foot additions and $80,000 master suites are being phased out. Yes, we are emerging from the recession and businesses are hiring again, but America has changed. What is driving this trend? Read on….
Credit is Tight
Let’s face it, credit is hard to come by now. Most banks are in a difficult position. Yes, they have access to historically low rates and have a consolidated industry. But…lending regulations are much tighter. The demands for low LTV (loan to value), spotless credit records, and sufficient monthly income make it more difficult than ever for homeowners to qualify.
What does this mean for you? It means you need to have excellent credit and have a healthy amount of equity in your home to borrow any money for home improvements. Banks will no longer lend on the value of your home based on the value after completion of the project. These stringent guidelines suggest it makes more sense than ever to take on smaller home improvement projects than in the past. (Moonworks offers a variety of financing options including 0% credit cards and can direct you to HELOC (home equity line of credit) providers.)
People Aren’t Moving
Harvard economist Jeremy Stein says it best, “People have seen their down payments kind of wiped out. They are locked into their house. They can’t really move, even if they thought the other house was cheap and a good deal.”
Because people may be locked into their existing homes longer than they planned, they are making this extended stay more comfortable and installing home improvements that not only increase the value of their home for the future when they do sell, but improvements that they enjoy. (What could possibly make your home more enjoyable than some new Renewal by Andersen replacement windows?)
Don’t Commit a Home Improvement Faux Pas!
Even with the credit crunch and smaller appetite for high spending, remodeling spending is projected to increase by 5% this year nationwide. The same home improvement projects of the past are popular, but on a much smaller scale. Homeowners are looking to revitalize or expand their existing space vs. a full addition. New kitchens remain the same size but gain new cabinets and appliances. New bathrooms are touting low-flow toilets instead of Jacuzzi tubs.
Additionally, homeowners are looking to cash in on the 2010 energy tax credits by adding energy-efficient windows, cool roofing shingles, home insulation, and even solar power. Contact Moonworks today to learn how you can tax advantage of these tax credits before they expire. Additionally, you can also read more about, which home improvements qualify for the tax credit in our new guide: Home Improvement Tax Credits Explained.