Homeowners are still bullish on home improvements, but the uncooperative housing market, coupled with hard mortgage money, is making them think twice about getting work completed.

For those who can afford home improvements, that could mean it'll be easier to drive a hard bargain and negotiate to get work done for less.

The Leading Indicator for Remodeling Activity (LIRA), which builds on the Remodeling Activity Indicator that the Harvard University's Joint Center for Housing Studies has been releasing since 1998, reveals home improvement expenditures in 2007 will fall 2.3 percent compared to 2006. By the second quarter of 2008, expenditures will be down 4.2 percent from the previous four quarters and the downturn is expected to continue further into 2008, according to the indicator.

That's because homeowners are concerned about the slowing economy, falling home prices, and the resultant impact on discretionary equity-based money.

Some economic indicators say the housing market recovery may not begin until the end of the decade.

One outlook for home prices based on early returns from housing futures contracts sold on the Chicago Mercantile Exchange (CME) sees home prices falling in major metropolitan areas as far out as 2011.

"The recent problems in credit markets are expected to dramatically reduce the level of cash-out mortgage refinancing activity," said Kermit Baker, director of the Remodeling Futures Program of the Joint Center.

"Given that equity withdrawals have been a key source of funding for home improvements, market spending is expected to suffer," he added.

The news comes even as consumers indicate they are aware of the value of home improvements, especially in terms of bolstering home values in a down market.

Seventy-four percent of consumers recently polled by Opinion Research Corporation said that making renovations or home improvements now will help them get the most money when they decide to sell.

Sixty-seven percent said they plan to initiate a home improvement in the next 12 month, but because they are pinching pennies, the majority plan to paint, rather than take on larger remodeling jobs.

The Opinion Research poll conducted for Miniwax Co. asked consumers where renovations would give them the most return and 63 percent of homeowners said a kitchen do-over while 51 percent said just buying new or refinished kitchen cabinets will add to resale value. Sixty-seven percent said painting the interior or exterior will add value. Other jobs frequently mentioned were bathroom remodels, 58 percent; new carpeting, 54 percent and new or refinished hardwood floors, 49 percent.

Remodeling may also be taking a back seat because more and more home owners are considering smaller homes or relocating, rather than building on.

When the Opinion Research survey asked homeowners what would they do if they could get the right price for their home 35 percent said they would downsize to a smaller house, townhouse or apartment; a similar amount said they would relocate to another city for a change of climate, new job or nicer neighborhood and only 26 percent said they would buy a bigger home.

"As homeowners become increasingly concerned about falling house prices and a slowing economy, home improvement spending is dragging," said Nicolas P. Retsinas, director of the Joint Center for Housing Studies.

"Coupled with very modest home sales, spending levels are likely to fall," he added.

Published: October 26, 2007

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.