Home fixes come early

THE BALTIMORE SUN

When Michael and Michelle Campbell moved from Rochester, N.Y., and purchased a 22-year-old home in Pasadena this month, they immediately began improving portions of the house and buying furniture to fill its rooms.

The Campbells decided to renovate the family room and master bedroom. The rooms will get a fresh coat of paint and new furniture. A ceramic tile floor was added in the family room and a cedar wall was refinished. And the bedroom and powder room were stripped of dated wallpaper.

Even though they are doing the work themselves, they expect to spend about $10,000 on improvements and furnishings for the bedroom and family room.

"This is our 11th move in 19 years," said Michelle Campbell, whose husband is in the military. "We didn't have to do anything, but we wanted to be comfortable. We are going to be here for a while."

Industry experts said homeowners are spending more money than ever during that first year in their homes. And real estate agents said homeowners should budget accordingly, so they can afford the personal touches they'll want to add.

Buyers of homes built after 1990 spent an average of $8,642 on improvements during the first year of living in the house, while those who bought a home built after 1990 spent $6,540 in the first 12 months, according to a 2000 study by the National Association of Home Builders.

The study found that 60 percent of the spending occurs within three months of moving into the house.

"People want to put their own stamp on the home," said Gopal Ahluwalia, director of research for the National Association of Home Builders. "It's a very common thing. We have been looking at this for a long period of time and, if anything, this trend is only rising."

He said the top expenditure for buyers of new homes is to build a deck and then finish the basement.

For those purchasing an existing home, the highest priorities are remodeling the kitchen, painting and carpeting. Transforming a room to a home office, exercise room or media room also is high on the list for buyers of new and existing homes.

A report by Harvard University's Joint Center for Housing Studies found that while homebuyers make some improvements to their homes every year, buyers are particularly likely to make major upgrades at the time of purchase.

The report used a variety of federal data to come up with its findings as well as information from banking and real estate industry groups.

The report cites a survey by trade publisher Hanley-Wood that suggests about 75 percent of homebuyers identify a list of desired projects at the time of purchase, and almost 90 percent begin work on these improvements within a year of moving into the home.

The Campbells, for example, gave themselves only a few weeks to make the improvements, hoping to finish the rooms before the furniture arrived.

"We are big do-it-yourselfers," Michelle Campbell said. "We do it because we like to do it and sometimes we think we can do it better. We take our time and don't cut corners."

They expect to remove some trees and add a deck within the year.

'Very unlikely'

"It's very unlikely a buyer is going to find a home where the cosmetics of that home match their tastes," said Dave Therrien, a real estate agent with Re/Max Classic in Pasadena and who sold the Campbells their home. "Even in new construction, they want to build a deck right away and that can be a very large expense."

Buyers who trade up in purchasing an existing home spend substantially more on improvements than first-time buyers do, according to the joint center study.

These buyers spent 2 1/2 times more on their homes in the first two years after purchase than owners who did not move. First-time buyers outspend other homeowners by about 60 percent, according to the recently released report.

Experts said renovation expenditures have climbed during the past few years because low mortgage interest rates have fueled record spending in home improvements and sales of homes.

"If home sales and home purchases trigger remodeling, it is not surprising you have record expenditures on remodeling," said Nicolas P. Retsinas, director of Harvard's Joint Center for Housing Studies.

The Campbells are paying for the renovations through money they saved and a security deposit that was returned to them when they stopped renting in Rochester. They also took advantage of financing options from furniture stores and the recent federal tax rebate for their two children.

An American Express national survey predicts that money budgeted for home improvements will rise to $3,796 this year, up 31 percent from 2000 and 43 percent from 1997, the year the survey was launched. The survey polled 341 people this year.

Also, more consumers (44 percent) named home improvements as their No. 1 spending priority from discretionary budgets, compared with vacation time or dining and entertainment.

Home improvement stores have capitalized on this trend and offer free seminars on a variety of renovations including how to install tile, hardwood floors and decks and how to landscape and paint.

Mike Wixted, a mid-Atlantic trainer for Home Depot Inc., said many first-time homebuyers attend the company's how-to seminars.

"In terms of percentages, new homeowners who have never done home improvements before would be the highest," Wixted said. "They are here to save money. The labor portion of a project is the most expensive."

Temptations

Irene Mabry Moses, a Realtor with Allen Realty in Baltimore and a member of the board of directors of the Greater Baltimore Board of Realtors, knows well the many expenditures new homeowners will be tempted to make.

To help new homeowners and her clients, many of whom are low- to moderate-income, she offers first-time homebuyer seminars with Tri-Churches Housing Inc. and other organizations in the Baltimore area.

"I stress that they are not used to paying a mortgage and then they want all of these things at one time," Moses said. "So to avoid that situation, I tell them to keep looking until they find all the things they want in a house. I urge them to take their time, get a wish list together and to get as much as they can from that list before they buy a house."

She also suggests her clients purchase or have the seller buy a home warranty when available. The typical warranty protects against breakdowns in major systems like plumbing, electrical, heating and air conditioning, as well as major appliances. This way, at least if something unexpected comes up, it likely will be covered.

"I try to tell people that you have 30 years to do whatever you want to do," Moses said. "So take your time."

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