Remodeling a Safe Investment For 2009 and Beyond
By Steve Khan
With bad news bombarding us on a daily basis about the doom and gloom around every corner of the US economy, what is an investor to do in these difficult times?
The year 2008 will be remembered as one of the worst years on record for the US economy and certainly the worst since the Great Depression.
That being said, there is still a light at the end of the tunnel as they say and that tunnel just might lead to the very roof over our heads.
During the latter half of 2008, investors in the stock market saw six years of gains disappear as the economy crumbled and markets crashed around the globe.
• The Dow Jones Industrial average fell 33.8% for the year
• The Standard and Poor’s 500 Index fell 38.5% for 2008
It is hard nowadays to find any economist of note who believes the stock market will rebound in the first half of 2009. Noted money manager Gary Shilling, president of A. Gary Shilling & Co. is on record as predicting the S & P 500 will see a drop of more than 30% from its current level down to the 600 mark. Ouch!
Housing down but not Out
In terms of housing, the initial data suggests a story in the housing market much the same as that coming from Wall Street.
Foreclosures are up, home prices are down, inventories in the most affected cities are at record levels and there appears to be little relief in sight for the battered and bruised housing market.
According to statistics released via the S & P Case-Shiller price index of housing prices in 20 major U.S. cities, housing prices dropped by a record 18% in 2008 down from 2007 levels.
The index has posted losses for 27 months in a row with Phoenix, Las Vegas, Miami, and San Diego experiencing some of the largest drops.
A first glance at the data is enough to make even the most optimistic housing market watchers cringe and squirm. But dig a little deeper and one finds that most housing markets across the nation haven’t experienced the headlines grabbing drops in value that we read about seemingly everyday.
- If one removes the hardest hit cities in California, Nevada, Arizona, and Florida, markets where speculation by investors was highest, the numbers are easier to digest.
- Markets such as Atlanta, Seattle, Portland, New York, and Boston saw a drop of 10% or less. Many more markets such as Dallas saw a drop in prices of less than 5%.
The incoming administration is expected to take big steps towards stabilizing the housing market and introducing legislation to reduce the large number of expected foreclosures still lurking in markets across the U.S. Assuming this is the case, what can one do to protect their home and what is often called most Americans single biggest asset they will own in their lifetimes?
Remodeling the Home a Safe Bet in 2009
Remodeling, improving, and upgrading one’s home might be the single best place to park your money in 2009 based on opinions from economists regarding their views on other investment sectors of the economy.
In a paper published by the Harvard Joint Center for Housing Studies titled “Housing Wealth effects and the Course of the US Economy”, author Eric Belsky clearly states that “housing is the cornerstone of household net worth”.
What Remodeling allows a homeowner to do with their home that owning a stock does not is the ability to make changes and improvements to the home that can and usually do increase the value of one’s investment for the long term.
In fact, in 2008 owning stocks has been a drag on workers 401K’s and retirement nest eggs for virtually all participants in the stock market. At one point during 2008 88% of all of the stocks in the S & P 500 were trading at their 52 week lows for the year.
The downside to the nature of stock investments is that shareholders have little input in to company decisions and can do nothing to increase a company’s share price nor your investment like you can with your home.
On the other hand, homeowners can have a profound and direct affect on increasing the value of their home by making smart and cost effective renovations to their home.
As an example, since Remodeling magazine first introduced the minor kitchen remodel category in 2004 to their annual Cost vs. Value report, this category has consistently remained among the highest return on investment (ROI) projects. In fact, last year, the minor kitchen remodel had the highest ROI of any interior project.
Steve Khan, owner and founder of AnchorBayTile notes that his customers are undertaking small scale remodeling projects mostly with a focus on their Kitchens and Baths.
Mr. Khan says “minor kitchen and bath renovations and upgrades have been a popular choice during the latter half of 2008” and he believes the trend will continue on in to 2009 since many homeowners can perform the work themselves.
Consider cost effective remodeling and renovation projects in 2009 as a means of stabilizing and strengthening your nest egg and what is the largest and single most important investment for most American households.
The beauty of improving your home is that nobody can ever take your work away from you (as long as you make your mortgage payment) and you have the benefit of enjoying those improvements every single day of your life.
AnchorBayTile.com is a full service online store offering all types of ceramic tile, glass tile, wood tile and metal tile for homeowners and commercial customers. The family-run company is committed to providing best-in-industry customer service to support their unique tile designs, shapes and colors. Their products are suitable for projects ranging from a basic residential remodel to a high level commercial design project. For more information, please visit their Web site at http://www.AnchorBayTile.com
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