The latest figures from Remodeling magazine indicate that most popular home remodeling projects can return home owners as much as 68 percent to 102 percent of costs if the home sells within the year. But the fact that most or even all of remodeling costs can be recuperated isn't the only reason homes are being updated in record numbers. Home owners are falling in love with their homes again. This may be good news for the remodeling industry, but where does that leave Realtors?

At the forefront of a nesting trend, according to a survey performed by the magazine. To understand where Realtors fit in, let's take a look at the 1990s market as outlined by the conclusions reached by the survey.

Riding the crest of the new traditionalism wave are the respondents to the survey -- mostly baby-boomer couples with an average age of 51, 68 percent of whom live in homes built between 1950 and 1979. The survey confirmed that unlike other investments, people feel a significant attachment to their homes, with feelings that ranged from "I love my home" (72 percent strongly agree) to "take pride in my home" (86 percent strongly agree).

Interestingly, when asked if they viewed their homes as good investments, most respondents said the value of their houses would not even keep up with inflation. Only 28 percent saw their homes as an investment, while 72 percent said it was "home sweet home." Yet more than 44 percent have remodeled their homes, and more than 33 percent plan to remodel in the next two years, revealing that where home ownership is concerned, emotion rules over economics.

And the remodeling industry expects many more home owners and buyers to remodel. Robert Sheehan II, principal of Regis J. Sheehan & Associates, a marketing research firm, says the remodeling industry has grown 5 percent above inflation for more than two years. In case you aren't impressed by that statistic, consider what Sheehan says: "When you account for the fact that the Federal Reserve gets nervous at 3 percent, then 5 percent is really good. The only time you see increases higher than that is after a period of recession."

The median income of home owners, according to the U.S. Census Bureau, was approximately $43,793 in 1996, up from $$43,067 in 1995, representing the highest rate of increase since the mid-1980s. Although figures for 1997 are not yet available, the increase should even be greater due to the improved economy. The figures mean that home owners have more purchasing power for updates, which should spur demand for residential remodeling at least through 1998.

Due to the slowdown in the economy between 1989 and 1993, many homes lost or barely maintained their value. As the economy improved, and with other positive economic indicators in alignment such as low interest rates, low inflation, and low unemployment, home purchases rose along with home values. Building equity for that period, the economics of home ownership also improved. Now longtime home owners are in a position to either stay and update, or sell their homes for a profit -- a can't lose proposition.

Popular remodeling projects such as major or minor kitchen remodeling, family room additions, and bathroom remodeling are recouping costs at a greater percentage than ever before, and more if the homeowner remains in the home. This is good news for both the home owner and the new home buyer. That means that a large amount of the remodeling costs can be recuperated, making it less possible for new and longtime home owners to get "upside down" in their mortgage payments and equity loans.

And that is good news for Realtors. To help your customers determine the most valuable remodeling projects for their homes, whether they are planning to put their homes on the market or move in and make immediate updates, download a copy of "Popular Remodeling Projects," available at the National Association of Home Builders Web site.

Published: April 2, 1998

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