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It May Be Time to Believe in Housing Again

It's hard to know what to believe in the housing market today, with so many conflicting data reports, some analysts claiming the market has hit bottom, and others seeing further doom.

California Suburbs
Allan Ferguson
California Suburbs

The home builders themselves can't seem to find anything to be optimistic about; their sentiment index has been stuck at the same lackluster level for four straight months.

It's not as hard, however, to believe in housing. By that I mean that as the economy improves, and consumers start to feel better about their personal finances, they are starting to think about investing in their homes again.

Too much price uncertainty in the market turns them off trading up, so they are looking around their current home instead.

Yesterday I met with an architect in suburban DC who says that in just the past two months the phone has been ringing off the hook.

"It's ringing with people saying, you know I want the $200,000 addition, which is the family room/kitchen or I can afford my screen porch now," says Michael Bruckwick of Katinas Bruckwick Architecture.

Just last year, clients told Bruckwick a very different story.

"Their biggest concerns was simply where is the world going ? The world that we live in. Is it to continue going down?"

And it's not just in the DC area, which has the benefit of lower unemployment thanks to government jobs. A remodeling index from Texas-based BuildFax shows a national surge in remodeling work toward the end of the year, which appears to be continuing now. It's returning, but cautiously.

"Inquiries for new project activity has fared a bit better recently, although many residential architects report that households are much more nervous than usual about proceeding on projects," notes Kermit Baker in the American Institute of Architect's Q3 Home Design Trends Survey.

The survey finds most activity is in smaller infill projects near major metro areas or remodeling to create multi-generational households. The trend has definitely moved away from major new housing developments. While the market is still quite weak in comparison to better economic times, remodeling remains pricey.

"Consumers are often assuming that project costs will be much lower given the market slowdown—expectations that many residential architects feel are unrealistic," adds Baker.

Bruckwick disagrees, claiming it's still "a buyer's market" for contractors and subcontractors. That will likely change as demand increases and contractors start to get more work. Lending is still extremely tight, and appraisals difficult and often low if you're looking to pull out equity for the job, but homeowners are slowly becoming less daunted.

A common line to Bruckwick: "My portfolio has come back up, so I can afford it where I couldn’t a year or two ago."

Questions? Comments? RealtyCheck@cnbc.comAnd follow me on Twitter @Diana_Olick