Remodeling
Success 101

Q: What are "investment" homebuyers?

A: Investment buyers are people or companies that buy homes in order to rent them to someone else. The rent pays the monthly mortgage and then, when the home has appreciated in value, it is sold. Investment (or speculative) buyers study local markets and are betting that the home's sale price will go up enough to sell it at a healthy profit, regardless of whether the home has been properly maintained.

The popular media -- radio and television, print media, websites -- provide us with information, but they always have one eye on another priority: to gain listeners and viewers, to sell papers and magazines, and to attract online readers. Unfortunately, the sensational spin sells better than complex or upbeat stories. That's why, during the past few years of record-setting new home construction and property value appreciation, the media has accompanied reports of this market with "warnings" about a so-called housing bubble destined to burst and to send the economy into a tailspin.

A housing bubble, at least on a national scale, is a myth. Housing has been and remains a locally focused business, even among builders that operate in several states and markets. Local economic conditions in each market drive the production and value of homes in that area.

At the national level, the median price of a home has increased an average of 5 percent every year even during recessions and periods of sales decline, according to the National Association of Realtors (NAR) who have been keeping records since 1968. Housing has been and continues to be a solid investment for homeowners and property owners, providing a steady return on investment. Because of the predictable need for future housing, such investment is largely unaffected by the volatility of the stock market.

The predictable need for future housing insures that when one segment of the housing industry (such as new home construction) slows down, opportunity opens for expansion in another, such as remodeling and home improvement. Instead of buying new homes, owners stay put and invest in existing homes. This is the time for owners to accommodate lifestyle changes or to maintain value by adding rooms, new or upgraded finishes or better systems for their existing homes. Although construction of new homes has slowed, dollars are still being invested in housing.

Current conditions are a perfect example of this phenomenon. Between 2004 and early 2006, the nation's homebuilders set a record for the number of new homes built in that time period. Price and property value appreciation also set new levels. Now the new-home industry is deliberately scaling back from that level of unsustainable activity and risk of oversupply.

During this time, homeowners have the opportunity to boost the value of their property and take advantage of the recent high levels of appreciation. In the wake of the record-setting levels of new construction and housing appreciation is a vast amount of equity in existing homes. That equity, in turn, can be leveraged by homeowners into a variety of financial options. Home improvement projects can serve a number of personal and financial purposes, such as a kitchen or bathroom makeover that updates style and convenience, or a home office that meets modern market demand for telecommuting or at-home businesses.

Without a doubt, a remodeling project beats trying to find precisely the features desired in another home. Even if such a home exists, its purchase typically requires selling an existing home in the current, slower market. Finally, as the new home industry recovers, existing homes featuring well-executed, market-savvy remodeling projects will demand top dollar and continue to be in high-demand.

Warm regards,

info@highcraft.net
www.highcraft.net

c. 2007 All rights reserved.

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