Edmonton Real Estate Blog

Home ownership has become a political — and economic — hot potato. Politicians are handling it with care.

Buying a house is about a great deal more than providing you and your family with permanent shelter or making an investment. Home ownership is one of the most fundamental economic and political pillars of society — which is precisely why the government of Canada is being so terribly careful not to mess with it.

Amid increasingly vocal concerns (from none other than the CEOs of Canada’s chartered banks and former Bank of Canada governor David Dodge) about the possibility of a housing bubble developing in Canada, Finance Minister Jim Flaherty has just introduced measures designed to cool the market down — at least a little bit

Because the central bank has committed to keeping interest rates low for the first half of 2010 in order to help stimulate the battered domestic economy, the worry is that Canadians are taking on massive new debt loads that they won’t be able to service when rates eventually rise.

All the latest data from the real estate sector reinforces such fears. According to the Canadian Real Estate Association, existing home sales in January were up 58 per cent from the depths of a year ago. But more critically, prices were up almost 20 per cent in that period to an average of $328, 537. That despite the fact that the economy is hardly blazing and unemployment continues to be a stubborn problem, despite some recent improvements.

All of this led Finance Minister Jim Flaherty — who, as recently as January, insisted he saw no evidence of a housing bubble — to announce some changes to the way that real estate lending is managed in Canada.

As of April 19, there will be some new, standardized criteria for mortgages. But it’s nothing that’s going to drastically affect the affordability of real estate — especially for first-time buyers — this spring. All the changes apply to mortgages backed by government-backed mortgage insurance (from Crown corporation Canada Mortgage and Housing Corporation) — a mandatory insurance when a buyer’s down payment is less than 20 per cent.

Here’s a rundown of the new criteria:

• To qualify for mortgage insurance new borrowers will have to meet the criteria for a five-year, fixed-rate loan rather than just a three-year loan. The borrower doesn’t have to take those terms — although the five-year rate is currently the most popular. It’s just a test to be certain they could still carry that amount of debt against gross income (the acceptable ration is 42 per cent allocated for housing costs from gross income) in the event interest rates pop.
• Folks who plan to refinance their houses to improve liquidity or eliminate higher cost credit card debt, can now only borrow up to 90 per cent of the value of their home, rather than the previously allowable 95 per cent.
• Those who buy non-owner-occupied residential rental properties for speculative or investment purposes now have to plop down 20 per cent of the price rather than just five per cent.

In other words, these measures are more about the perception of action than a major credit crackdown. It’s a way for the federal government to flag its concern and to take some proactive measures without really dislocating the real estate market.

At the very most, the careful steps taken by Mr. Flaherty are expected to take some of the heat out of markets where ferocious bidding wars have been steadily driving up prices for houses and condominiums.

It’s part of a gradual process that started in July 2008. Although Mr. Flaherty continues to deny there’s a housing bubble, Ottawa announced back then that CMHC would only insure mortgages when there was at least a five per cent down payment. That basically squeezed out the zero-down loans which often saw purchasers borrow as much as 103 per cent of the value of their house (land transfer and other associated charges were folded into the mortgage).

At the same time, the government stipulated that mortgages could only be amortized over 35 years rather than 40 years. Flaherty is hoping to reverse the sudden increase in 2006 of amortization periods (before this, the long-time standard was 25 years).

For those people like Mr. Dodge, who’s been publicly fretting about the sustainability of the Canadian housing market for at least four years now, Mr. Flaherty’s cautious changes may not be quite as tough as hoped. But that issue brings us to the political heart of the matter.

Being elected is a popularity contest. Maintaining a favourable home buying climate is one of the most important things a government can do to maintain that popularity. Nothing says we’re working on your behalf like voters who are able to live their dreams.

It’s also conventional wisdom that home ownership is good for both a society and an economy. People who own homes are considered to be more stable and more politically engaged — they are more likely to feel like stakeholders in their communities. Which means they vote, pay taxes and generally get involved in positive things.

Home ownership also means that there is a reliable, fixed workforce available for businesses. And homeowners are the consumers who are constantly spending the money that makes GDP go round — for appliances, furniture, home renovations and so on.

All of this — along with a remarkably resilient period of general economic prosperity — has led to a pretty deeply-ingrained set of expectations around housing. In North America, there’s not much question that home ownership has come to be viewed as an inalienable right.

Because politicians – and governmental institutions like CMHC — are among those who’ve encouraged that fundamental sense of entitlement, they have to be very careful not to rock the boat — especially when conditions are already choppy. For that reason, Mr. Flaherty has borrowed a page from central bankers’ playbook and he’s essentially trying to “jawbone” the housing market into cooling down rather than taking more Draconian steps.

Let’s hope it works before Canadians hear the loud popping noise that confirms a real estate bubble not only existed, it’s now exploded.

Source: MSN Money – By Deirdre McMurdy, February 19, 2010

Planning on building, buying or improving your home this year? Chances are you’re thinking smaller, smarter and more family-centric.

“We continue to see a ‘cents and sensibilities’ approach when it comes to buying or improving a home, said Eliot Nusbaum, Better Homes and Gardens‘ executive editor for home design.

Nusbaum made the comment while presenting the results of the magazine’s Next Home Survey at the National Association of Home Builders’ International Builders Show in Las Vegas last month.

Price, energy-efficiency, organization and comfort are top priorities of potential new home buyers and homeowners who are planning improvements in the next few months, he said.

“Today’s homeowner is also looking for a home that fits the entire family-from a multi-tasking home office, to expanded storage space, to a living room that can adapt to advancements in home entertainment and technology,” said Nusbaum.

Later, speaking by phone from his office in Des Moines, Iowa, he said: “When someone says their highest priority is an efficient HVAC system, you know we’re not living the same dream as three years ago. That dream was having a showplace home-a McMansion with the emphasis on two stories, big public spaces and an expensive fit-and-finish kitchen.

“Now, those things have drifted to the back burner. Today it’s ‘what I need’ versus ‘what I want.’ People are being sensible and practical. They want low-cost improvements that pack a big punch,” he said.

There were no major surprises in the survey results, “Though I thought it was interesting the number of people-85 per cent-who expressed a desire to have a separate laundry.”

And Nusbaum was mildly surprised that 70 per cent of those surveyed wanted low-maintenance landscaping, “when gardening is supposed to be America’s top hobby.”

NEW-HOME TRENDS

Here are some of the results of Better Homes and Gardens’ Next Home Survey, and some of the trends that may influence new-home building and home-improvement projects in 2010:

87 per cent of respondents said a greener, more-energy efficient home is a priority.

68 per cent wanted an outdoor grilling and living area.

59 per cent wanted a home office.

36 per cent said their next home would be “somewhat smaller” or “much smaller.”

75 per cent said the economy has impacted their home-improvement plans.

52 per cent said now is the time to spend on needed repairs and maintenance, rather than major home-improvement projects.

Source: Better Homes and Gardens

This won’t hurt a bit, homebuyers.

The mortgage rule changes announced Tuesday by Financial Minister Jim Flaherty will weigh a bit on real estate speculators and heavily indebted people who want to fold their high-rate credit card debt into a lower-rate mortgage. But for rank and file homebuyers, the changes will barely be perceptible when they take effect on April 19.

“This should have a limited impact on what I see daily,” mortgage broker Peter Majthenyi said in an e-mail he fired off after Mr. Flaherty’s announcement. “I believe it’s more a message that ‘Big Brother’ is watching and cares.”

Olympics aside, the favourite Canadian diversion of the moment is to debate whether there is a bubble in the housing market. Those most worried about the housing market plunging have urged Mr. Flaherty to raise the minimum down payment for a home and reduce the maximum payback period.

But the 35-year amortization, favourite of first-time buyers across this land, remains. So does the 5-per-cent down payment, which is heavily relied upon in high-cost cities like Vancouver, Calgary and Toronto.

All the measures announced by Mr. Flaherty affect mortgages covered by government-backed mortgage insurance, where the buyer puts less than 20 per cent down. The key change for typical home buyers is that, regardless of what term or type of mortgage they choose, they’ll have to be able to afford the five-year rate.

This is a sensible way of building some slack into the system as we look ahead to a cycle of rising interest rates. If someone chooses a variable-rate mortgage, where the interest rate can be as low as 2 to 2.25 per cent today, they’ll have to be able to handle the payment at the current five-year rate. Right now, the posted rate at the big banks is 5.39 per cent.

You won’t have to actually make the higher payments required by the five-year mortgage. You’ll just have to theoretically be able to carry them and still remain within the limitations lenders set out on how much of your gross income can be consumed by debt (it’s 42 to 44 per cent, just so you know).

Mortgage brokers report that a lot of lenders were already ensuring clients could afford the payments on a three-year mortgage. So bumping up that up to a five-year term will only have a marginal effect.

“Are we going to see the odd borrower have to come up with more money or not buy they house they want? Absolutely,” Mr. Majthenyi said. “But will it have a dramatic effect? No.”

Another reason why the changes won’t be jarring is that a huge number of homebuyers are actually choosing five-year mortgages these days. A study issued by the Canadian Association of Accredited Mortgage Professionals last month showed that fixed-rate mortgages accounted for 86 per cent of mortgages in set up in 2009 and, of those, 70 per cent were for a five-year term.

People who borrow to buy investment properties to either flip for a quick profit or to generate income are also affected by Tuesday’s announcement. If you buy a property you’re not going to live in, then you’ll have to put down a minimum 20 per cent to qualify for mortgage insurance. That’s up from 5 per cent.

But Mr. Majthenyi said not all lenders even require clients to have mortgage insurance if they put 20 per cent down. He also said that stiff mortgage insurance premiums already discouraged people from putting 5 per cent down on an investment property.

“In my office of 10 brokers, I don’t think I know of one client we’ve processed on a high-ratio rental property,” he said.

The final mortgage change restricts the ability of existing homeowners to refinance their mortgages to take on more debt. The new ceiling is 90 per cent of the value of your home, compared to the current 95 per cent.

Mortgage broker Jas Grewal said one group that will be affected by this is recent buyers who made a small down payment and are struggling with high credit card balances and other debts. By folding these debts into their mortgage, they can reduce their interest rate from as high as 19 per cent down to something closer to 3 or 4 per cent.

“Let’s say you put 10 per cent down – if we go from 95 to 90 per cent, you’re not going to be able refinance,” Mr. Grewal said. “You’re going to have to wait until your house value goes up and gives you some equity.”

Source: Rob Carrick of the Globe and Mail (www.TheGlobeandMail.com)

   New Mortgage Rules: The Good, The Bad, The Ugly

Early signs indicate that Canada’s hot real estate market surged again in January. Among the cities to report data, sales rose an average of more than 60 per cent, and prices more than 14 per cent, from a year earlier in Toronto, Calgary, Edmonton and Ottawa, BMO Nesbitt Burns said. In Toronto, sales jumped 87 per cent and prices 19 per cent. Earlier this week, the Real Estate Board of Greater Vancouver reported that, excluding apartment properties, sales rose 141 per cent in January from a year earlier, and prices 19.5 per cent.

www.TheGlobeandMail.com

Edmonton, February 2, 2010: Single family homes sold through the Edmonton Multiple Listing Service® System sold on average for the same amount in January as at year-end while condominium prices dipped 2%. Month-to-month sales slowed by 6.8% as compared to December but the number of new listings in January doubled the December numbers. 

The average* residential price was $314,783 for January, down 1.4% from last month and down just 0.7% from a year ago. Single family home prices on average were stable increasing minutely from $366,761 in December to $367,747 in January. Condominium prices dipped just 2% in the month from $244,174 to $239,006. Duplex and rowhouse prices were up 1.5% to $300,563.

“There will be month-to-month fluctuations in prices for all types of properties,” said Larry Westergard, president of the REALTORS® Association of Edmonton. “We expect that the local market will continue to be robust and prices will trend upwards through the year.”

Compared to December, housing sales were down in January with 524 single family sales and 288 condominium sales. Total residential sales were 884 units – 154 ahead of last January. There were 2,199 residential listings added during January resulting in a 40% sales-to-listing ratio and a month-end inventory of 4,864 homes. The average days-on-market was 57 days. Total sales (including residential, commercial and rural properties) in January were valued at $315 million (up 19% from last year).

“While the low prices may have motivated some buyers, the continuing low interest rates are probably a bigger factor for first time and repeat buyers,” said Westergard. “The inventory increase shows that current owners are poised to enter the market and to offer their homes for sale. Buyers and sellers should consult their REALTOR® to work out an appropriate strategy for their situation.”

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Highlights of MLS® activity

¹. Residential includes SFD, condos and duplex/row houses.
². Single Family Dwelling
³. The middle figure in a list of all sales prices

* Average prices indicate market trends only. They do not reflect actual prices, which may vary.

Source: REALTORS® Association of Edmonton

LAS VEGAS, Jan. 19 – A survey of consumers and builders, conducted in 2009 by the National Association of Home Builders (NAHB) and the MetLife Mature Market Institute, has yielded a new round of data revealing the housing preferences of the 55+ consumer. This analysis of data – the third in a series – compared the preferences of the 55-to-64 year old age group to those of the 65+ group.

The data uncovered a strong similarity in housing preferences between the two groups, with a few exceptions. The younger age group showed more interest in technology-heavy features, while the older group expressed a stronger preference for a single-story floor plan or one with a first-floor master bedroom, and a variety of universal design features.

One striking difference, according to John Migliaccio, director of research at MetLife’s Mature Market Institute, related to the desire for home services and community services.

“Very telling, said Migliaccio, “is that the younger group of mature consumers reported enthusiastically that they want services like home maintenance and repair as part of their next home purchase, along with services typically connected to older homeowners, such as housekeeping, onsite health care and transportation,” noted Migliaccio.

According to Migliaccio, all of the aforementioned were ranked higher than the desire for organized social activities – a surprise, inasmuch as social activities and amenities have been thought to be valued quite highly by this group. This finding, he said, supports an emerging trend among builders to look for ways to partner with providers of such services to the residents of their active adult/lifestyle communities.

According to Mike McGowan, a 50+ builder from Binghamton, N.Y. and chair of NAHB’s 50+ Housing Council, “Most buyers in this market are looking for an easy-living lifestyle. They would like access to services that will free up their time from maintenance both inside and outside their homes. This data tells builders that the homes we build for older active adults will remain attractive to the consumers who will be entering that market for the foreseeable future.”

Paul Emrath, NAHB’s vice president for survey and housing policy research, pointed out that the share of households that will want lower-maintenance housing is large, and growing larger as Baby Boomers age into that segment of the market. He cautioned that the current financial situation has led to sharply decreased construction of communities that serve the mature market. Without a change in the availability of capital for development and construction, there could well be a shortage of such housing when it is most needed.

For more information on the MetLife/NAHB research, including the first two reports on the age group and consumer preferences, visit: nahb.org.

Source: HGTVpro.com

Homebuyers want smaller houses and they are willing to strip some of yesterday’s most popular rooms-such as home theatres-from them in order to accommodate changing lifestyles, consumer experts told audiences at the International Builders Show here this week.

“This is a traumatic time in (the United States) and the future isn’t something we’re 100 per cent sure about now either. What’s left? The answer for most home buyers is authenticity,” said Heather McCune, director of marketing for Bassenian Lagoni Architects in Park Ridge, Ill.

Buyers today want cost-effective architecture, plans that focus on spaces and not rooms and homes that are designed ‘green’ from the outset,” she said. The key for homebuilders is “finding the balance between what buyers want and the price point.”

For many buyers, their next house will be smaller than their current one, said Carol Lavender, president of the Lavender Design Group in San Antonio, Texas. Large kitchens that are open to the main family living area, old-fashioned bathrooms with claw foot tubs and small spaces such as wine grottos are design features that will resonate today, she said.

“What we’re hearing is ‘harvest’ as a home theme-the feeling of Thanksgiving. It’s all about family togetherness-casual living, entertaining and flexible spaces,” Lavender said.

Paul Cardis, CEO of AVID Ratings Co., which conducts an annual survey of homebuyer preferences, said there are 10 “must” features in new homes:

1. Large kitchens, with an island. “If you’re going to spend design dollars, spend them where people want them-spend them in the kitchen,” McCune said. Granite countertops are a must for move-up buyers and buyers of custom homes, but for others “they are on the bubble,” Cardis said.

2. Energy-efficient appliances, high-efficiency insulation and high window efficiency. Among the “green” features touted in homes, these are the ones buyers value most, he said. While large windows had been a major draw, energy concerns are giving customers pause on those, he said. The use of recycled or synthetic materials is only borderline desirable.

3. Home office/study. People would much rather have this space rather than, say, a formal dining room. “People are feeling like they can dine out again and so the dining room has become tradable,” Cardis said. And the home theatre may also be headed for the scrap heap, a casualty of the “shift from boom to correction,” Cardis said.

4. Main-floor master suite. This is a must feature for empty-nesters and certain other buyers, and appears to be getting more popular in general, he said. That could help explain why demand for upstairs laundries is declining after several years of popularity gains.

5. Outdoor living room. The popularity of outdoor spaces continues to grow, even in Canada, Cardis said. And the idea of an outdoor room is even more popular than an outdoor cooking area, meaning people are willing to spend more time outside.

6. Ceiling fans.

7. Master suite soaker tubs. Whirlpools are still desirable for many home buyers, Cardis said, but “they clearly went down a notch,” in the latest survey. Oversize showers with seating areas are also moving up in popularity.

8. Stone and brick exteriors. Stucco and vinyl don’t make the cut.

9. Community landscaping, with walking paths and playgrounds. Forget about golf courses, swimming pools and clubhouses. Buyers in large planned developments prefer hiking among lush greenery.

10. Two-car garages. A given at all levels; three-car garages, in which the third bay is more often than not used for additional storage and not automobiles, is desirable in the move-up and custom categories, Cardis said.

Source: Steve Kerch of Marktwatch (Yourhome.ca)

TORONTO — Canada’s residential real estate market is expected to remain unusually strong through the first half of this year after a strong finish to 2009, according to a survey published Thursday by Royal LePage.

The Royal LePage analysis is consistent with other recent reports on the state of the Canadian real estate market, which has rebounded over the past 12 months after sales dried up in late 2008 and hit a multi-year low in January 2009.

The Canadian market’s sudden plunge was sparked by a credit crunch that originated in the U.S. housing and lending industries – eventually spreading globally, causing a worldwide recession in the late summer and early fall of 2009.

However, the Canadian real estate market has been much quicker to recover than its American counterpart, in part because of a more stable banking industry, historically low interest rates and improving consumer confidence.

Royal LePage executive Phil Soper says Canada’s real estate market enters 2010 with “considerable momentum from an unusually strong finish to the previous year.”

The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity to new highs, he said in a statement.

Royal LePage says house prices appreciated in late 2009, with fourth-quarter price averages higher than in the fourth quarter of 2008.

The average price of detached bungalows rose to $315,055 (up six per cent), the price of a standard two-storey home rose to $353,026 (up 5.2 per cent), and the price of a standard condominium rose to $205,756 (up 6.4 per cent).

Regions that saw the strongest declines during the recession are now showing marked gains. Those regions include Toronto and the Lower Mainland, B.C.

Vancouver, which is frequently Canada’s most expensive real estate market, experienced a particularly robust quarter, with home prices rising across all housing types surveyed.

“No other sector of the economy has been as highly affected by economic stimulus as housing,” said Soper.

“As consumer confidence has improved, Canadians have shown a lingering reluctance to acquire depreciating assets such as consumer durables, but have embraced the opportunity to invest in real property.”

Royal LePage estimates that Vancouver’s real estate prices will rise a further 7.2 per cent this year, although February may be soft because of the Olympic Winter Games that will be held in the city and nearby Whistler, B.C.

Detached bungalows in Vancouver sold for an average of $828,750 in the fourth quarter, up 11.4 per cent from the same period last year. Standard condominiums in Vancouver went up 11.8 per cent year-over-year to an average of $452,750. Prices of standard two-storey homes in Vancouver rose 9.6 per cent year-over-year, selling at $917,500.

In Toronto, the average price of a standard condo rose 2.9 per cent to $309,316, detached bungalows rose 9.9 per cent to $446,214 and standard detached homes increased 3.5 per cent to $564,175.

In Montreal, the average price of a detached bungalow rose to $245,125 (up 3.1 per cent; a condo increased to $216,667 (up 16 per cent) and a two-storey house increased 12.3 per cent from a year earlier to $345,789, Royal LePage said.

The Greater Montreal Real Estate Board reported Thursday that the number of sales last year increased 41,802, up three per cent from 2008. The median price of a single-family home was $235,000 last year, up four per cent from 2008.

“Although sales decreased the first four months of 2009, Montreal’s real estate market rebounded and finished the year on a positive note,” said Michel Beausejour, the Montreal board’s chief executive.

The group that represents Toronto-area realtors reported Wednesday that there were 87,308 transactions last year through the Multiple Listing Service, a 17 per cent increase over 2008.

In December, there were 5,541 sales in the Greater Toronto Area (average price $411,931), up from 2,577 sales in December 2008 (average price $361,415), according to the Toronto Real Estate Board.

The Toronto board also said the number of sales of existing homes rebounded in the latter half of 2009 after a slow start at the beginning of last year.

Royal LePage’s average price estimates for other Canadian cities include:

-St. John’s, N.L.: Detached bungalow, $217,167 (up 14.3 per cent); standard two-storey house $298,833 (up 14.1 per cent).

-Halifax: Detached bungalow, $238,000 (up 10.7 per cent); standard two-storey homes, $265,333 (up 1.8 per cent).

-Charlottetown: Detached bungalow, $160,000 (up 1.9 per cent); standard two-storey $195,000 (up 3.7 per cent).

-Saint John, N.B.: Detached bungalow, $228,000 (up 1.3 per cent); standard two-storey $299,000 (up 1.5 per cent).

-Moncton, N.B.: Detached bungalow, $152,300 in the fourth quarter (up 1.5 per cent); standard two-storey home, $131,000 (up 4.0 per cent)

-Fredericton: Detached bungalow, $182,000 (up 12.3 per cent); standard two-storey, $210,000 (unchanged).

-Ottawa: Detached bungalow, $332,417 (up 3.4 per cent); standard two-story home $331,917 (up 3.7 per cent).

-Winnipeg: Detached bungalow, $241,650 (up 9.9 per cent); standard two-storey home $275,500 (up 10 per cent).

-Edmonton: Detached bungalow, $299,286 (down 0.7 per cent); standard two-storey home, $340,557 (down 1.2 per cent)

-Calgary: Detached bungalow, $412,478 (up 0.5 per cent); standard two-storey home, $427,067 (up 2.3 per cent).

By David Paddon Copyright © 2010 The Canadian Press

NEW YORK (CNNMoney.com) — Home remodelers are getting less bang for their bucks. For the fourth straight year, renovation jobs have added less to resale values relative to their costs, according to an annual Remodelling Cost vs. Value Report released this week by the National Association of Realtors.

The average remodelling job cost $50,908 in 2009 and added $32,497 to the value of the home, a ratio of 63.8%. That was down from a cost-to-value ratio of 67.3% in 2008, when the average was $49,866 and the added value was $33,568.

One common renovation, a mid-priced bath remodel, for example, runs an average of $16,142 and adds only $11,454 to the resale value of a house — recouping just 71% of its cost. In 2008, the same job cost less — $15,899 — and typically added $11,857 to the home’s value, recouping 74.6%.

The most financially successful jobs are smaller-scale, lower-cost renovations that improve the exterior appearance of homes. In this down real estate market, curb appeal is king.

“Once again, this year’s report highlights the importance of a home’s first impression,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz.

Ron Phipps, a real estate broker in Rhode Island, said how the house looks from the outside is more important than ever.

“If you’re driving down the street and the house doesn’t have great appeal, it doesn’t matter how nice it is inside,” he said.

But here’s the kicker: Clients are savvier than ever in their shopping. Even though the costs of home improvements are less likely to be returned on resale than they have been in prior years, sellers may still have to bite the bullet and do the remodelling if they want their house to sell at all, he said.

“It’s kind of intriguing,” said Phipps. “Buyers are using the unimproved houses to negotiate lower prices, but they wind up buying the remodelled homes.”

So, if there are two similar houses in the area, buyers will use the listing price of the one that has not gone through a metamorphosis to get the seller of the renovated house to slash their price. Buyers want to pay for the caterpillar but get the butterfly.

Seller must play along if they want to make deals. “You get to sell the house more quickly if you do the renovations,” Phipps said.

Biggest pay-offs

The major job that returns most in resale value is an upscale replacement of siding using fibre-cement. The job costs an average of $13,287 but increases home value by $11,112, or 83.6%. A vinyl siding replacement returns 79.9% of costs.

Adding a basement bedroom is also fairly cost effective, averaging $49,346 but adding $40,992 in value, an 83.1% return.

“Increasing liveable square footage with a new deck or an attic bedroom is usually more valuable than just remodelling existing space,” Phipps said.

The return on investment for some jobs varies greatly by region.

In New England, where winter are long and cold, vinyl window replacements reap a better return than they do in the warm South Atlantic region, where poorly insulated windows don’t mean as much expensive heat leaking away.

So, although replacement windows cost more in New England — an average of $11,155 — they add $9,152 to home values there, recouping 82.3% of their cost. In the South Atlantic states, they cost $9,705 but add just $7,417 to home values, 76.4% of their cost.

On the other hand, buyers in the South Atlantic seem to reward sellers for adding living space more than they do in New England. Maybe thrifty Yankees hate having to heat those extra rooms.

Finishing a basement returns 84.4% of its $55,357 cost in the South Atlantic and only 64% of the $65,715 New Englanders spend for the job.

Among the remodelling jobs faring the worst in return on investment were large, upscale kitchen remodels. They cost an average of $111,794 in 2009 and added $70,641 in recoupable value, just 63.2%.

That was down a whopping 7.5 percentage points from their 70.7% return on investment in 2008 . At the height of the housing boom, in 2005, upscale kitchen renovations returned more than 80% of their costs.

“A lot of the things that, historically, had huge value, don’t have as much today,” said Phipps. “If you want to redo a kitchen, it may no longer make as much sense to use upscale appliances — Viking ranges, Sub-Zero refrigerator. Buyers may not pay any more than they would for a home with GE appliances instead.”

Of course, most remodelling jobs are done to please homeowners. Any increase in home value is a bonus, not an end in itself. But for anyone thinking of selling in the near term, keeping an eye on the bottom line is always a good idea

By Les Christie CNNMoney.com