Rising Remodeling, but Does Green Pay?
The good news is that homeowners are expected to spend more on home remodeling in 2010, the bad news is that "green" remodeling isn't adding to home values. Two reports from the International Builders Showin Las Vegas this week have served to put me, and many other potential remodelers, into a conundrum.
Remodeling activity is currently down 30 percent from its peak in 2007, according to the Remodeling Futures Program at Harvard University's Joint Center for Housing. Much to the dismay of the Lowes and Home Depots of the nation, the wave of home equity that fueled granite kitchens and double-sinked marble bathrooms in the middle of the last decade has dried up to a drip.
But as the recession eases, researchers at Harvard claim that by the second quarter of this year homeowner spending on remodeling will rise to an annualized rate of $107.7 billion and by the third quarter, to $110.0 billion.
"It appears we may be near the bottom of the current remodeling cycle," says Nicolas P. Retsinas, director of the Joint Center for Housing Studies. "With signs of stabilization in the national economy, homeowners are once again planning home improvement projects."
But should homeowners be planning "green" home improvement projects?
The politically correct answer is, of course, yes!
But the financially correct answer may not be. A report from the National Association of Home Builders, also from its big show in Vegas, says that while many manufacturers, like Kohler, Marvin Windows and Doors and Whirlpool , are ready to go with new lines of sustainable products for the home, "until lenders and appraiser learn to recognize the value of green innovation and the money it can save new home buyers, there is not enough incentive in the marketplace for large-scale implementation." That's from Bill Nolan, a Florida home building consultant.
"We can't get lenders to appreciate the value of the net costs, and if we can't get the values recognized, [manufacturers] can't justify moving these products forward," adds Nolan.
Well that's all well and interesting for the manufacturers, but as a homeowner, I'm also concerned that all those pricey "green" upgrades, while paying back to the environment, aren't going to pay me back when I decide to sell my home. I realize that they may save me in utility bills and that they will make me feel like a better all-around person, but I'd also like to see some equal payback in home equity.
Unfortunately recent studies have shown buyers aren't really willing to pay much more for homes with green upgrades, but I have to think/hope that may be changing.
It's a conundrum to be sure.
If appraisers won't get on the "green" bandwagon, how can buyers?
Questions? Comments? RealtyCheck@cnbc.com