Home Value Increase With Remodel
Aging U.S. housing stock pushes demand for mortgage products that address needs
of people who are looking to remodel older homes
(ARA) - Home remodel projects come in all shapes and sizes: from simple handyman
projects that breathe new life into a home to a major remodel that
involves gutting a house and redesigning the floor plan to customize it for
your lifestyle. The reasons people remodel are as varied as the projects
that homeowners can undertake: adding a room, modernizing a kitchen -- even
improving the energy efficiency of a home by adding new doors and windows.
Most home values increase with remodel.
The nationwide housing boom of the past few years is extending beyond the
initial purchase of a home. People are putting money into their houses
to improve comfort, safety and protect their initial investment. According to
the Remodeling Activity Indicator (RAI) used by Harvard's Joint Center for Housing
Studies, homeowners continued to invest in their homes by spending almost $127
billion on remodeling in 2004 -- up by almost 6 percent over 2003 levels. The
money invested results in home values increase with remodels.
One reason for the jump may be a mortgage option that allows borrowers
to purchase and renovate a home using a single loan.
'renovation loans give homebuyers some options when it comes to considering
houses that aren't perfect," says John Sway, renovation program manager for
Wells Fargo Home Mortgage. "With the majority of the nation's housing stock
at least 25 years old, there's demand for mortgage products that address
the needs of homebuyers who are looking at older homes that need some
TLC."
In the past, financing options were limited, especially if the owner didn't
have sufficient equity in the home. These days, however, homeowners
have choices that were developed specifically to help buyers and owners finance
home improvement projects.
The Federal Housing Administration's (FHA) 203(k) loan is one of the more
popular renovation loan programs. This loan is generally used to update or improve
a house or condominium needing a minimum of $5,000 in essential repairs such
as new wiring, plumbing, roof repair/replacement or structural repairs.
Home Value Increase With Remodel
Other renovation loan programs offer higher loan limits, allowing
buyers to obtain more financing toward the purchase and improvement of the property.
In addition to essential repairs, these loan programs can sometimes allow financing
for luxury items such as swimming
pools, hot tubs and sunrooms.
"These mortgage products are great tools for homeowners and important for
community revitalization," says Sway. "Homebuyers and neighborhoods benefit
from the improvements these loan programs make possible. Investing in a home
contributes to the financial well-being of the owners, and it certainly contributes
to the financial well-being of a community because the homeowners are preventing
these older homes from deteriorating and falling out of the housing
stock."
A recent study by Harvard's Joint Center for Housing Studies showed that minority
homeowners are expected to become a major growth market for home remodeling
and repair. From 1995 to 2000, minorities accounted for 60 percent of the
increase in households and 40 percent of the increase in homeowners. It is only
a matter of time before these homeowners start spending on remodeling
projects and have an important impact on home improvement activity.
Over the coming decade, many metropolitan areas are expected to see a noticeable
pickup in remodeling activity, especially as rising home prices force
an increasing numbers of buyers to lo
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