Move out, or fix up?


When Jim and Holly Robinson and their 1-year-old daughter, Kaylee, moved into their new home, it was perfect.

But after three years and two more children, perfection became a little cramped. Living a bit cozier than they wanted, the Robinsons decided it was time to remodel and enlarge their Lisbon home.

"We knew we didn't want to move out of the area; we love the neighborhood and our neighbors," Jim Robinson said. "When we moved into this house, at the time, we considered it huge. Then with two more kids, we were left wondering what happened to the big house we were in."

Taking advantage of a low-interest home-equity loan, the Robinsons added a fifth bedroom, enlarged the family room and expanded their deck.

"We knew we wanted to enlarge the family room. It just seemed too small, and that's where we spend most of our time in the house," he said. "So we thought, while we are doing that, why not just add another bedroom above?"

Unlike the Robinsons, Mac and Anne MacLure didn't outgrow their house.

It was always in the MacLures' plans to expand their home by adding another bedroom. But during the seven years that they've lived in their home, it became apparent that they could do even more with the house than just add a bedroom.

So they hired an architect to draw plans for adding two bedrooms, three full baths, a home office and a mudroom. They also sought to convert their garage into an expanded kitchen and dining room and wanted to build a new semidetached garage.

But then came the estimates, which were double their budget. And the MacLures realized that moving might well be more practical.

"So we started looking at new houses and basically what we found was that we had [already] created this house that would be perfect for us on paper," Anne MacLure said. "And even though it meant that it might be less expensive to move, we decided we wanted to stay here. So we decided to bite the bullet and figure out financially how we would handle it."

They asked their architect to make plans that could be phased in over five years and asked contractors who were bidding on the project to eliminate parts of the plan that might be done at a later time. In the end, only the remodeling of the master bath was put on hold.

At one time or another, most homeowners have to decide whether it makes more sense to move or to remodel. Factors that typically are part of the decision include affection for the existing location, the feasibility of the remodeling job and the costs involved.

In today's market, as the economy continues to take a downturn, consumer confidence becomes another important factor in the decision.

Historically, when there's a slow economy, it means more people will make the same choice as the Robinsons and MacLures and decide to remodel instead of move.

"Consumer confidence has obviously been affected by the events of Sept. 11," said Gene Lugat, senior vice president of AccuBanc Mortgage Corporation in Columbia and president of the Maryland Mortgage Bankers Association. "And it is affecting people's desire to move."

With low mortgage rates that are hovering around 6.5 percent and home equity lines of credit tied to a 5 percent prime rate, the mortgage banking industry has seen a tremendous upturn in consolidation loans. How that eventually affects the remodeling market is yet to be seen, Lugat said.

"We are so thick in the refinances right now we can't see the forest through the trees. We are not really seeing a pick-up of volume on the remodeling side," he said. "But historically, over periods of a tougher or slower economy, remodeling and rehabilitation loans tend to be driven up. So when the economy starts slowing down, we start seeing people investing in their home."

Even before the terrorist attacks of Sept. 11 rattled the economy, the remodeling industry was moving forward.

Residential remodeling expenditures increased 7 percent last year compared with total expenditures in 1999, according to the U.S. Census Bureau. Total spending reported for all residential properties rose to $152.9 billion, compared with $142.9 billion in 1999.

And while the maintenance-and-repair portion of the market held virtually steady in 2000, other expenditure areas increased.

Additions and alteration projects, which include popular jobs such as kitchen and bath renovations as well as room additions, increased by nearly $6 billion over the previous year, to $77.9 billion.

Expenditures on major replacements that cover window, roofing and siding installations and replacement of major housing systems such as furnaces and air conditioning, increased by 15 percent or a little more than $4 billion, to $32.8 billion, last year.

Locally, the remodeling industry has benefited as well.

The dollar amount of remodeling activity in the Baltimore region was $74.6 million in the second quarter of 2001, up 13.7 percent from the second quarter of 2000, according to the Baltimore Metropolitan Council.

Anne Arundel County and Baltimore County led the region with $24.2 million and $22.6 million, respectively.

"What we often find is that when new residential construction slows down, we see an uptake in residential remodeling," said Joe Nathanson, with the Baltimore Metropolitan Council. "People are deciding to stay in place and put the money into their existing residence. That appears to be the case in what we are seeing in the first half of this year."

In the first half of 2001 there were 3,611 addition, alteration and repair permits issued in the Baltimore metropolitan area, according to the Baltimore Metropolitan Council, which measures permits of $10,000 and above. That compares with 3,228 permits issued from January through June 2000.

'Straight uphill'

"If I tracked remodeling in terms of growth since the mid-1990s, we basically have been straight uphill," said Michael Owings, with Owings Brothers Contracting, who did the remodeling job for the MacLures.

"We've seen no fluctuation in the last 18 months at all. So many of our customers are becoming more and more rooted in their homes because they like the school district or because they like the home's mature landscaping. Many of them just don't want to start over."

Homeowners taking advantage of low-interest rates have also made an impact on the remodeling market, Owings said.

"What we are finding are people that are refinancing at an incredible rate," Owings said. "Over the past year, we have gotten a ton of remodeling based on refinancing. And right now we are very diverse in our workload. We have everything from home repair and maintenance, to handyman work, to $400,000 and $500,000 remodels."

Jay Van Deusen, with Van Deusen Construction Co. in Bel Air, however, said he's seen a growing hesitancy to spend money.

"Since Sept. 11, people are a little more cautious about which direction they are turning as far as remodeling or building. But also, the available land has really dried up in the area," Van Deusen said.

"Even with the economic issues aside, there's the whole issue of supply and demand. People are definitely more apt to fix up their house to increase capacity or to make it more habitable for them."

Something that has made that easier, Van Deusen said, is the concept of offering design-build options. Simply, it's a one-stop shop where the remodeler can not only do the construction, but also offer to complete the design drawings and even a three-dimensional schematic of the house or addition. This allows homeowners to visualize what a remodeling job can do for their house.

And, budget permitting, there is usually a design solution for any problem the homeowner might face.

"We can generally come up with a design solution, as long as they have a budget that allows for an expanded list of options," Van Deusen said. "It's an educational process for them, and we take care of any zoning issues as well."

The decision of whether to remodel or move can come down to: "Is it worth it?"

"People are going to have to live through the construction of the remodel, and some people would just rather move," said Mark Redman, with Gemini Design/Build, the company that completed the Robinsons' project.

"If people like where they live, the schools and the area, they are more apt to live through four months of construction because they may be there for 20 years."

There is a balance that has to take place between the economic side and the personal side. Usually, one factor will outweigh the other, Redman said.

"The most important thing is to make sure it's done right," he said. "This is your biggest investment. You don't want to look back and say why didn't we take our time and do it right."

With an ever-aging housing stock in the Baltimore metro area, there are certain amenities - such as a family room or master bedroom suite - that, once added, will not only increase a home's value but also make it more marketable.

When considering remodeling, a balance should be given between how much the owners can expect to recoup if they sell the house and how much they are willing to spend to enjoy the remodel, said Dwight Griffith of Griffith-Brilhart Builders, a custom homebuilder in Harford County.

"I always suggest, before my clients make a decision, for them to go out and see what the options are. My clients are not driven to remodel then turn around and sell. They are remodeling because they are staying and want the house a particular way," Griffith said. "If they are only going to stay in the house for three years or so, typically, remodeling will not increase dollar for dollar the value of the house."

As a general rule of thumb, Griffith said, updating and expanding kitchens and bathrooms or adding a family room or master bedroom suite will help make the house more marketable.

"Although it may not increase dollar for dollar, it may make the house sell a little faster," Griffith said.

Homeowners often make the mistake of assuming that they'll recoup the full cost of a major renovation when they sell. This usually isn't the case unless considerable time has passed between the renovations and selling.

And homeowners also must be careful not to over-improve for the neighborhood. They don't want to have the most expensive house in the neighborhood, the experts say.

"When you are doing your remodeling estimate, you need to be very aware of the values in your neighborhood," said Tom Pirritano, a real estate appraiser. "So we suggest you receive a quote from the contractor, then have an appraisal done before you sign the contract. So once you do remodel, you will be sure it will have a market value of similar connotation to the amount of work you do."

No room for emotions

Pirritano suggests that homeowners keep their emotions in check and be somewhat practical in their objectives when remodeling.

"You want your home value to be in the middle where you have more room for market growth and appreciation. They need to look at how long it is going to take to recover the money invested in remodeling. Not enough homeowners examine the impact of the property's value prior to undertaking a remodeling project."

Of course if the remodeling project is a lifestyle choice, and the homeowner has no intention of moving, the envelop can be pushed.

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