With the news that Americans' percentage of equity in their homes has fallen below 50 percent, homeowners are looking for ways to increase the value of their properties. The methods that are most popular are cost-effective home improvements.

The erosion of home values has produced yet another troubling statistic. The Federal Reserve recently indicated that the percentage of equity in an average American home has slipped below the 50 percent mark for the first time since 1945. Declining home values throughout the country have sent prices in a downward spiral, and many homeowners have seen their home equity dip into negative numbers.

To help restore some home equity, many people are performing smart, cost-effective home improvements. Here are some top methods for improving the pricetag of your property:

Kitchen and bathroom renovations

If you're looking for the biggest bang for your buck, consider remodeling either your kitchen or bathroom. These tend to result in the biggest return-on-investment for homeowners. Unfortunately, they're also the costliest parts of the home to remodel. Start with simple cosmetic upgrades to these rooms, especially if you're looking to sell your home in the near future. Complete overhauls can cost tens of thousands of dollars, and will take years to recoup your investment.

Don't go overboard

Naturally, you'll want to keep your home well-maintained and problem free. If you have exposed wood on the exterior of your home that appears to be rotting, for example, replace it or wrap it with siding. Letting bad conditions deteriorate will only cost you more money in the long run.

However, when it comes to older appliances, don't upgrade unless it's absolutely necessary. Your old air conditioner might be a bit of a clunker, but if it's doing an adequate job, stick with it-especially if you're planning to sell the house in the near future. A prospective buyer won't place a premium on new appliances, so don't overspend in this area.

Be frugal with big renovations

If you'd like to make some large-scale renovations to your home, make sure that they won't hurt the long-term marketability of the property. Keep your improvements within the character of your house and neighborhood. For example, don't install a $75,000 home theater in your basement if your place is only worth $150,000. You'll never recoup the costs. Be careful that your improvements don't make your house the most expensive one in the neighborhood. It's better to be in the middle of the pack so that it's easier for you to sell.

The sharp decline in the level of home equity is both a reflection of our sagging economy and the recent housing market slump. If you need to sell your home in the short-term, consider using some of these tried and true home improvement tactics. Because the market is jittery, this is the time to make level-headed home improvement decisions. In the long run, they'll add value to your property, and dollars to your wallet.

Published on April 2, 2008