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Financial payoff important, but so is comfort factor


Like many young couples starting a family in the 1960s, Harriet and Morton Silverstein settled into a brand new $16,000, semidetached home in a northwest Baltimore County development. But unlike many of their contemporaries, the Silversteins decided to stay put, rather than move to a bigger house as their children grew.

Now in their 60s, and with a fifth grandchild on the way, the Silversteins' starter home has become their retirement home.

And it's almost brand new again.

Since 1993, the Silversteins have sunk more than four times their original investment into renovating and expanding the house. "We wanted the comforts of our old neighborhood with the luxuries of a newer house," Mrs. Silverstein said.

The renovations include a new kitchen, which is a 350-square-foot addition to the house; an enlarged bathroom with a Jacuzzi; and a bigger dining room that seats 12. In addition, the owners enlarged closets, installed new appliances, and replaced windows.

Without doubt, the Silversteins' "new" house is worth more -- on paper -- than any other contemporary property in the neighborhood. The Silversteins have, in effect, priced themselves out of their market. But none of that matters to the couple.

"We don't have any intention of leaving," Mrs. Silverstein said. "The minute I walk in my house I'm just thrilled. We're very proud."

The Silversteins' decision to invest with their hearts, rather than their heads, reflects a growing preference on the part of American homeowners to retool, rather than relocate. In a recent survey of professional remodelers, 53 percent said clients were remodeling instead of purchasing new homes. And 63 percent of those surveyed cited more space as the chief reason for remodeling in the first place.

This year, U.S. homeowners will spend close to $123 billion on home remodeling -- nearly 10 percent more than just two years ago, according to the National Association of Home Builders (NAHB). By the end of the decade, investments in home-remodeling are expected to top $175 billion.

Several factors are spurring the home-remodeling boom. For one, the average American home is 28 years old, and showing its age. Dark paneling and green shag were all the rage in the 1960s, but they're poison to prospective homebuyers today. In addition, interest rates had been creeping up, discouraging many first-time homeowners from moving up into larger homes. And aging baby-boomers are less mobile than they once were.

All in all, more people are staying put.

In 1993, according to the National Association of Realtors, 40 percent of homeowners had lived in their homes for four to seven years; in 1989, only 22 percent did.

As home remodeling becomes more popular, the reasons for putting up with all the dust and inconvenience are changing. In the 1980s, homes in most parts of the country were appreciating rapidly. Thus, homeowners could be reasonably confident that alterations made one year would be reflected in a higher sale price the next.

But those days are gone.

"You have to think of your home not just as an investment anymore," said Sue March, a real estate agent with O'Conor Piper & Flynn Realtors. "Renovating is not something you want to do if you're going to move in the next three or four years because you probably aren't going to get your money out of it."

This leaves many homeowners in a quandary. Should you remodel to be more comfortable, regardless of cost? Or invest a bare minimum, to ensure that you recoup costs when it's time to sell?

Even the experts seem to come down on the sentimental side of the question. "Unlike owning stock, where there is not much enjoyment, with a house, you're actually using it," said Bryan Patchan, executive director with the NAHB Remodelors Council.

"You can enjoy that kitchen or new room addition. So keep in mind, the longer you have it, the more you get out of remodeling."

For Denise Quandt and Bill Balke, who recently remodeled the second story of their 80-year-old stucco Roland Park home, this line of reasoning made sense. By replacing small upstairs bedrooms with a master suite -- a bedroom with attached bathroom -- and a bigger guest room, Ms. Quandt estimated that "we're probably going to be in the high end of our neighborhood" in terms of resale price. That's a concern, "especially because the market's gone down."

But Ms. Quandt reasoned, "If the only consideration were financial, we might not have done as much as we did. But part of it is just making the house enjoyable to be in."

While your heart may cry out for cathedral ceilings and a solarium, there is a danger in doing too much.

"Why put in $40,000 to get a $40,000 return?" asked Mr. Patchan. "It isn't worth the risk."

What's more, he added, if you know you'll need to sell one day, bear in mind that "a lower-cost house in an upper-cost neighborhood goes more quickly than one at the top of the range."

Although a radical make-over worked for the Silversteins, beware what some experts call "super-adequacy." An in-ground pool, say, in a neighborhood where they're not popular isn't a wise investment.

One of the biggest mysteries for many home remodelers is guessing the appeal of their renovations to the next buyer.

To play it really safe, there are certain improvements that hold their value in almost any market. They're not particularly glamorous, but they may do more to make your house sellable than anything else. These include energy-efficient windows, and modern kitchens and bath.

Rule of thumb: Whatever lasts the lifetime of the mortgage is worth doing. Everything else -- like new carpeting or fresh paint -- is cosmetic.

So if you're planning to remodel anytime soon, sit down first and do some personal figuring. Are you seeking long-term comfort, or gambling on short-term profit? Once your motives are clear, it's time to draw up the floor plans.

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