Does the Housing Market Affect You?

Think you remain untouched by the ups and downs of the real estate market if you are not buying or selling a home? Think again.

A recent study by the Illinois Association of REALTORS found that real estate transactions pump nearly 8 billion dollars into the state economy each year and provide wages and salaries for more than 85,000 Illinois workers. Chances are you know someone that works in the housing market, or employees impacted by related industries such as movers, retailers, attorneys, home inspectors and financial service firms.

Outside of creating jobs, the real estate market stimulates local and state economies in other important ways. Just one home sale generates more than $28,000 in expenditures, which means that your new neighbors will likely be significant supporters of the businesses in your community.

What is driving the spending associated with home sales? The simple fact is that change often motivates investment. Sellers are preparing to make a change to a new home, and buyers are doing the same.

• to prepare for a home sale, sellers may pay for repairs or improvements that require contractors or building professionals, financing and retail support.
• Research shows that immediately after a home purchase, buyers continue in a spending mode that often includes appliances, furnishings and remodeling expenses.
• New homeowners continue spending at levels higher than non-moving owners for two years after their home purchase, spending an average $7,400 more than similar homeowners that are not moving.

The last few years have been challenging ones for the real estate market in some Chicago areas, but things are looking up. While home sellers and buyers might be celebrating the favorable environment, even those of us staying put should support this positive shift: increasing home sales and the economic results of those sales benefit all Illinois residents.

Renovations Should Boost Curb Appeal

With the housing market still trying to recover, homeowners have changed their plans. Instead of selling their home, homeowners are staying put and remodeling.

According to a major report released by the Joint Center for Housing Studies at Harvard University, the U.S. home improvement industry is poised for growth. A New Decade of Growth for Remodeling is the sixth and latest report in the Improving America's Housing series, published by the Remodeling Futures Program at the Joint Center.

"As both the economy and housing market stabilize, so too will home improvement spending," says Abbe Will, a researcher with the Remodeling Futures Program. Over the coming years, remodeling expenditures are expected to increase at an inflation-adjusted 3.5 percent average annual rate, below the pace during the housing boom, but sharply recovering from the recent downturn.

In the next five years, according to the study, the focus of remodeling spending will shift from upper-end discretionary projects to replacements and systems upgrades.

When homeowners make renovations, they should consider what will give them their best rate of return. Exterior modeling projects lead the way for recovery on dollars spent. In comparing the national average, replacement projects that boost curb appeal--siding, windows and decks--give homeowners the greatest chance of recouping their money. Inside, only kitchen models can compare.

According to the National Association of REALTORS website, here are the top 10 projects and their estimated return rate. Do any of them apply to you or someone you know?

1. Upscale fiber cement siding (86.7%)
2. Midrange wood deck (81.8%)
3. Midrange vinyl siding (80.7%)
4. Upscale foam-backed vinyl (80.4%)
5. Midrange minor kitchen remodel (79.5%)
6. Upscale vinyl window replacement (79.2%)
7. Midrange wood window replacement (77.7%)
8. Midrange vinyl window replacement (77.2%)
9. Upscale wood window replacement (76.5%)
10. Midrange major kitchen remodel (76.0%)

One final suggestion if you're considering renovating is to get more than one estimate. Like a lot of businesses in today's market, there are companies offering discounts. Shop around and get the best deal!

What if home improvement paid you back?

Each year, Remodeling Magazine and Realtor Magazine team up to produce the Cost vs. Value report.  The study looks at regional building permit data to estimate remodeling costs for more than 30 common home improvement projects.  Then, Realtors weigh in to estimate the value these projects add to a home’s market value.  It’s a handy report that gives homeowners some perspective on the best way to spend home improvement dollars each year.

But the report is missing one thing.  What about payback?  Many of the project scopes could be tweaked just a little to include some energy efficiency improvements at the same time. It's a super-smart time to add these steps while drywall is already off and walls are already open - you cut the dust and prices later over doing these same improvements as stand alone projects.  These upgraded projects would potentially add not just value, but offer savings through reduced energy costs.

The following lists show the Top 5 Chicagoland projects based on estimates of remodeling costs recouped at resale as reported in the Cost vs. Value report.

The second list uses energy data compiled by the Center for Neighborhood Technology/Energy, Efficient Windows Collaborative, ENERGY STAR and Keep Warm Illinois to show the top projects based on natural gas savings for a typical/average home in the Chicagoland area.

2010 Top  Chicagoland Home Improvement Projects:

• #1 Steel Entry Door Replacement - Cost recouped:  102.1% - Cost:  $1,218, Resale value:  $1,243
• #2 Garage Door Replacement - Cost recouped:  83.9% - Cost:  $1,291, Resale value:  $1,083
• #3 Siding Replacement (Fiber Cement) - Cost recouped:  80% - Cost:  $13,382, Resale value:  $10,707
• #4 Minor Kitchen Remodel - Cost recouped:  72.8%  - Cost:  $21,695, Resale value:  $15,790
• #5 Deck Addition (wood) - Cost recouped:  72.8% - Cost:  $10,973, Resale value:  $7,986

2010 Top Chicagoland Payback + Value Projects:

#1 Basement Remodel + air sealing + insulation.  Extra energy efficiency costs:  1% (Upgrade to air seal & insulate basement - $1,000-2,000; Tip: be sure to also upgrade home ventilation)

Potential average energy savings: 24%

#2 Attic Bedroom + air sealing + insulation.  Extra energy efficiency costs:  3% (Upgrade to air seal and insulate attic - $1,800-2,400; Tip: be sure to also upgrade home ventilation)

Potential average energy savings: 24%

#3 Window Replacement (wood) + air sealing.  Extra energy efficiency costs:  10% (Upgrade to air seal walls, attic, basement - $1,300-1,700; Tip: The savings comes from the caulk around the windows more than the new windows themselves!  And, be sure to also upgrade home ventilation.)

Potential average energy savings: 24%

#4 Siding Replacement (Fiber Cement) + air sealing + insulation.  Extra energy efficiency costs:  21% (Upgrade to air seal walls and insulate side walls -$3,500-4,500; Tip: The savings comes from sealing leaks in the walls more than the new siding itself!  And, be sure to also upgrade home ventilation.)

Potential average energy savings: 32%

#5 Steel Entry Door Replacement + air sealing.  Extra energy efficiency costs:  17% (Upgrade to advanced weather-stripping - $250; Tip: Savings comes from buying a well-insulated door and then sealing it with effective weather-stripping!)

Potential average energy savings:  11%

Estimates are one thing, knowing the exact savings opportunities for your specific home is another.  A home energy audit is a great place to start.  Utility program incentives are scare in Illinois (People's customers get a good one), but not a bad place to start just to see if resources are available.  Or, contact a local energy auditor.

Entry door and siding replacement make both the top cost recouped and payback lists.  So if you are considering either of those it is simply a no-brainer to include energy efficiency upgrades in your scope!

2011 Energy Efficiency Tax Credits

Last year, the federal government offered some pretty juicy tax credits for energy efficiency home improvements.  The amount has been basically cut to a third (from $1500 to $500). But if you use the credits wisely, they are still a great opportunity to make your home more comfortable and save money every month on your energy bills! 

Green Homes America offers an easy-to-read overview with details on this year's credit, how much for different improvements and more. 

Items of Interest for 2011

So the Illinois Association of REALTORS published a long list of laws that take effect January 1, 2011 that are important for REALTORS (excerpts below are taken from illinoisrealtor.org/newlaws2011). A few of the items caught my eye that I thought would be beneficial to our consumer blog subscribers. I know it's not the most exciting information to read but it's informative, especially when it applies to you!

 

Solar Energy System Ban Restricted

Certain homeowners, property owners or condominium unit owners associations will be prohibited from adopting bylaws, deed restrictions or covenants that would ban the installation and use of a solar energy system. These associations must adopt an energy policy statement regarding the location, design and architectural requirements of solar energy systems within 120 days after it receives a request for a policy statement or an application from an association member. It approval is required for installation or use of a solar energy system, the application must be processed within 90 days after the submission of the application. If an application is submitted before the association has adopted an energy policy statement, the 90-day period does not begin to run until the date that the policy is adopted. The association is given the right to determine the specific location where a solar energy system can be installed on the roof provided it does not impair the effective operation of the system and the solar energy system would be required to meet applicable standards and requirements imposed by state and local permitting authorities. Important Note: The new law does not apply to any building greater than 30 feet in height.

 

Lead Safety in Renovating/Remodeling

The United States Environmental Protection Agency (EPA) began its mandatory lead-safe certification process on April 22, 2010. While contractors and remodelers have the primary responsibility to comply with the new federal mandates, property managers may also face new compliance requirements. A new U.S. EPA pamphlet, "The Lead-Safe Certified Guide to Renovate Right" must be given to homeowners or tenants before work begins. Property managers doing any renovation, repair and painting work must be trained and certified in the new lead-paint safe work practices. Outside contractors also must be trained and certified. Mandatory training and certification on lead-based paint practices will be required for renovation, repair and painting activities in single and multi-family housing built before 1978, child care facilities and schools.

There are strict rules on equipment that can be used as well as new record keeping requirements and stiff fines are in place. If a property owner is conducting their own renovation, repair or painting activities they are exempt.

 

I have more to report but it's too much...too much for one blog post.

Own a home or planning on buying home built prior to 1978. New EPA guidelines could effect how you hire a contractor.

This includes common renovation activities like new windows, new carpeting installation, sanding, cutting, and demolition can create hazardous lead dust and chips by disturbing lead-based paint, which can be harmful to adults and children.

To protect against this risk, on April 22, 2008, EPA issued a rule requiring the use of lead-safe practices and other actions aimed at preventing lead poisoning. Under the rule, beginning in April 2010, contractors performing renovation, repair and painting projects that disturb lead-based paint in homes, child care facilities, and schools built before 1978 must be “certified and must follow specific work practices to prevent lead contamination”.

For more information visit the EPA's website at the following link:

http://www.epa.gov/lead/pubs/renovation.htm Or contact me at: keith@usexterior.com

New Lead Law Goes Into Effect April 22, 2010

A new Renovation, Repair and Painting lead law goes into effect April 22, 2010.

What does this mean for you, the consumer? The new law requires contractors, property managers and others paid to replace windows or renovate residential houses, apartments and child-occupied facilities built before 1978 to be certified by the U.S. Environmental Protection Agency. This new law is designed to protect children from leaded dust that may result from disturbing lead-based paint.

The Illinois Department of Public Health will be conducting meetings around the chicagoland area. For more information, please call the Illinois Lead Program at 217-782-3517

Looking for the right contractor

As a contractor in business for over 10 years, I have seen a lot in regards to the economy, the housing market and the construction industry. As times get tough in the construction industry, contractors look for ways to trim costs. Often this is done by cutting insurance coverage. Verify your contractor has coverage. Requesting a “Certificate of Insurance” does this. The certificate of insurance (aka COI) shows the policy dates and the coverage amounts.

All contractors should have a general liability and workman compensation policy. If they do not have these two basic coverage’s and something happens to either an employee or your home while they are working, you could be held liable. In addition to this basic information, make sure your contractor is insured for the work he is performing. For example: Dryvit or Stucco repair contractors require special coverage to work on your home. In another example a roofing contractor should be covered to work on roofs. If he does not have this coverage and lets say a storm blows in while he has half your roof off and your home suffers severe water damage, your insurance could be liable. His insurance will deny coverage since his coverage did not include the roof. In the unfortunate event this happened at the renewal of your policy, your insurance company will more then likely not renew your home since it had a major claim that could have been avoided. In an extreme case, your insurance could also deny coverage, leaving you to cover all damage on your own.

In addition to insurance, the Illinois Attorney Generals Office requires you to receive a copy of the “Know Your Consumer Rights” on all projects over $ 1000.00. A contractor that does not provide you with this basic informational pamphlet is in violation of state law and can be fined under the law. To view this pamphlet and your rights visit: http://www.illinoisattorneygeneral.gov/consumers/homerep0505c.pdf

Most contractors are reputable and will often give you this information without you even asking.

Lastly, all contractors have the same expenses: labor, materials and insurance. Their bids should be within 5 – 10% of one another. If there is large discrepancy investigate – don’t just take the low bid. If you don’t understand the bids involve someone that does. Several home inspectors will review the bids and give you their opinion. They do charge for this service, but in could be well worth it.

Remember, if it looks to good to be true, it probably is and you always get what you pay for!

ENERGY STAR Appliance & HVAC Rebates in Illinois!

The State of Illinois recently announced rebates to Illinois home owners from now through Earth Day. Some of the rebates can be doubled-up with Federal tax credits for additional savings!  All ENERGY STAR products are tested to ensure that they save energy over traditional models, and pass additional quality checks so that they will last.  If you have been thinking about making improvements to your home, now is a great time! 

See the full details on how to earn the rebates, and how to earn Federal tax credits as well.  The quick summary is below:

*  WATER HEATERS - State rebate of 25% off at the register from now until they run out. Buy models that are >= .82 efficiency to earn additional 30% federal tax credit!

*  FURNACE & AC - State rebate of $350-1200 off (depending on unit) at the register from now until they run out.  See link above for details on how to earn additional 30% federal tax credit too!  Always best to do an Energy Audit of your home before you purchase new HVAC equipment. 

*  FRIDGES, FREEZERS, DISHWASHERS, CLOTHES WASHERS & WINDOW AC appliances - State rebate of 15% off at the register.  Additional mail-in rebate up to $100 if you recycle your old appliance!  Available only from April 16-25.

Ice Damning Warning Signs

It is not uncommon this time of year to see water stains at wall and ceiling corners where you have never seen it before.

Typically this type of water entry is caused from a phenomenon called "ice damning". Ice damning occurs when we have snow and ice followed by above freezing temperatures. The surface snow and ice melt and pool in an area that the ice was too thick to thaw at the same rate. It then re-freezes at night as the temperatures drop making the block of ice even thicker. The next day the same cycle happens. The pond gets deeper and eventually goes over the top of the flashing and enters the house at the wall, soffit or the roof deck. Once this happens you see either water staining or wet spots on the inside walls, ceilings or floors.

This is something that should not be ignored, over time mold and wood rot came develop. If you see this at your home or building have it looked at sooner rather than later.