Mortgage Crisis Silver Lining: Home Improvement

The storm clouds over the housing market have a silver lining: Now's a great time to renovate your home.  Instead of rushing out to get a home equity loan, however, consider the new trend in home improvement projects-paying cash.

Times may be tight and home equity scarce, but a home improvement project could be a great financial move.  A typical homeowner may be surprised to learn that renovating in this economy is a brilliant idea for a number of reasons. First, home improvement specialists are desperate for work.  Second, materials are less expensive than ever before.  And third, you could generate quite a bit of home equity if and when the housing market turns around.

Work wanted:  The ironic tale of home improvement specialists

Remember when you couldn't find a carpenter, plumber, or handyman to save your life?  During the housing market boom, home improvement specialists would be booked three to six months in advance.  Because the work was so plentiful, these tradespeople would cherry-pick the biggest jobs.  They avoided smaller projects, leaving homeowners in need of basic maintenance high and dry.

With the housing market tanking, home improvement specialists are now willing to take on the smaller jobs.  It's a nice match for today's homeowners, as most are only willing to pay cash while limiting the size and scope of the projects.  Many homeowners are reluctant to tap home equity until the economy stabilizes.

Renovate cheaper than ever before

Home improvement specialists are looking for work, and they're also willing to slash their costs.  Expect labor price decreases of 10 to 30 percent, with prices on materials lower than ever, thanks to the slumping economy and plummeting fuel costs.  Petroleum-based products, such as vinyl and asphalt, are less expensive.  It may be time to consider replacing the roof or your driveway.

Energy-efficient projects are also a good idea. The low cost of labor, combined with savings on electricity and heating, could make a furnace repair or a new refrigerator a timely purchase.  A number of home improvement projects also qualify for tax credits, such as new windows, doors, insulation, and roofing.  Check for a complete list at energystar.gov.

Spend today, see the results tomorrow

Adhering to the classic investor maxim, "Buy low, sell high," a home improvement project will result in significant long-term rewards when the housing market bounces back.  You'll need a long-term perspective, as home values may continue to drop in the short term.  In time, though, your property should recoup value.  Many homes can't fall much further in value, so today's home improvement project could result in a higher amount of tomorrow's home equity.

It's hard to imagine something positive in this gloomy economy, but it may be the right time to seek out a home improvement project.  If you have the cash, you'll have the good fortune of getting cheap labor and materials at reduced prices.  Move today because, some time in the near future, home values may start moving again in an upward trajectory.