Remodel Or Relocate?

It can be a wise move to transform the home you know into the place you now may need

April 28, 2002|By Adele Evans | Adele Evans,SPECIAL TO THE SUN

Belinda and Marty Hall had come to a crossroad.

Their Carroll County home was in need of renovations at a time when they were thinking about sending one of their two children to a better middle school.

The problem: Should they remodel their Sykesville home and stay, or move up to a house in a better school district?

Their first impulse was to forget remodeling and make the move to Howard County to partake of its highly recognized school system. But after seeing Howard County's housing prices -- where the average sales price in March for a four-bedroom home was $359,423 vs. Carroll County's $258,559 -- remodeling their home didn't seem like such a bad idea after all.

"It was much cheaper to remodel and pay for private school, than to move to a comparable home in Howard County," Belinda said.

They wound up transforming their worn-out sun porch into a spacious, modern sun room and plan to continue remodeling.

What the Halls experienced is symptomatic of what is happening in this hot Baltimore real estate market. Buyers who can't find a home because of the shrinking supply of homes for sale or fall into sticker shock by seeing soaring home prices are deciding to stay put and renovate rather than depart.

"In Harford County, three areas already have building moratoriums due to overcrowded schools. People will add on. That bodes well for me," said Bel Air-based remodeler Jay Van Deusen.

Yes, remodeling can be grimy, stressful, time-consuming and expensive, but then, so can moving. And with interest rates in the low 7 percent range and soaring home values creating more equity for owners, the opportunity for "cash-out" refinancings and new home equity lines of credit to remodel is helping to keep homeowners at home.

"Two, three, four years ago there was not much rehabilitation work going on with existing homes," said Alan R. Ingraham, president of the Greater Baltimore Board of Realtors and a regional vice president for First Horizon Home Loans MNC Division. "So those people weren't looking to do home equity lines and looking to add on to their homes and modify them."

Now, according to Ingraham, an "explosion" of home equity loans and refinancing "really has resulted in a number of people accomplishing what they wanted to as far as additional space or rooms, without having to buy another home.

"Rather than trade up, they've decided to adjust to what they are living in."

That's just the financial aspect. When a move-up buyer becomes frustrated that he can't move up, second-guessing a decision to move begins.

"The love for the [current] area, your roots, the land and the sweat equity in the home ... emotion wins," said Michael Owings, president of the Remodelor's Council of the Home Builders Association of Maryland and a principal of Owings Brothers Contracting. "Of the people who talk to me about the dilemma, 85 percent stay put" and remodel.

Ellicott City homeowner Jean-Luc Frande says that if he and his wife, Mary Fran Frande, were to make a move up "the house had to be worthwhile, not comparable. After we looked at other homes, we decided we really liked our own. I wanted to remodel now to enjoy it now."

At first, the Frandes wanted to build a 6,500-square-foot dream home on a minimum of an acre. But when the stock market tumbled last year, they decided that paying about $165,000 to remodel their 3,500-square-foot home was a wiser financial choice than paying $1 million-plus for a custom home.

"With the stock market doing an about-face recently and with housing prices continuing to rise, many homeowners are surprised to learn that the equity in their home makes up a larger portion of their net wealth than the holdings in their stock market or retirement funds," said Michael DeStefano, president of Sturbridge Builders in Anne Arundel County and president of the Home Builders Association of Maryland. "Remodeling, then, becomes the key to protecting and enhancing the investment value of your home."

The price of remodeling

How much money is being spent on remodeling?

According to the Remodeling Activity Indicator devised by the Harvard Joint Center for Housing Studies, Americans in the first quarter of 2002 are on a pace to spend $106.5 billion on renovations.

Heightening the home remodeling frenzy is the fact that much of the area's housing stock is 40, 50 or 60 years old.

In a 2001 report, the Harvard Center reported that of the nation's 8.6 million homes, 43 percent were built before 1950 and another 35 percent between 1950 and 1969. Hence, in 1999, 26 million homeowners undertook 44 million home improvement projects.

"These homes are in desperate need of makeovers, and we're reaping the benefit now," said Michael Owings, president of the Remodelor's Council of the HBAM and who runs Owings Brothers Contracting.

Consequently, many remodelers are busy enough to limit their business to referral clients only and ask for -- and often get -- top dollar.

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