Can You Afford to Remodel?
Monday, July 17, 2006
There is a lot of uncertainty in the real estate market and the ecomony in general. Rising interest rates, oil and fuel costs, and a cooling housing market are keeping a lot of homeowners from making huge leaps into the home improvement game. Everyone wants to make more room in their home or update the old rooms, so what do all those uncertainties mean?
Well, it can mean that the pending "housing bubble" may finally burst and if housing prices drop, it means a homeowner might have less equity in their home to borrow against to make those home renovations. But, according to a very recent report from the Joint Center for Housing Studies of Harvard University, there's a great chance that the current cooling period is just that -- a cooling period. And not a bursting real estate bubble.
Why? Well, in the past, nearly every single housing bust, or overall drop in housing prices, has been accompanied or caused by excess over-building of new homes and/or excessive unemployment. Neither of those are happening today.
While interest rates have been climbing over the past few quarters, and there is the possibility of a new recession or change in the job markets, this current housing price "cool off" should not lead to a big drop in home valuation. If housing prices stay at current levels or only drop slightly (and temporarily) -- which they should (because of the lack of "over-building" or excessive supply of new homes and the job market) -- then it will be likely that things will be okay. Remodeling and renovations, home additions, and new home construction plans can continue on, full steam ahead.
Well, it can mean that the pending "housing bubble" may finally burst and if housing prices drop, it means a homeowner might have less equity in their home to borrow against to make those home renovations. But, according to a very recent report from the Joint Center for Housing Studies of Harvard University, there's a great chance that the current cooling period is just that -- a cooling period. And not a bursting real estate bubble.
Why? Well, in the past, nearly every single housing bust, or overall drop in housing prices, has been accompanied or caused by excess over-building of new homes and/or excessive unemployment. Neither of those are happening today.
While interest rates have been climbing over the past few quarters, and there is the possibility of a new recession or change in the job markets, this current housing price "cool off" should not lead to a big drop in home valuation. If housing prices stay at current levels or only drop slightly (and temporarily) -- which they should (because of the lack of "over-building" or excessive supply of new homes and the job market) -- then it will be likely that things will be okay. Remodeling and renovations, home additions, and new home construction plans can continue on, full steam ahead.
