Friday Rant: When Home Renovation Spend Makes Sense, But Maybe Not Cents

The past four years or so have made many people far more frugal consumers. And the housing market is a strong case in point. It wasn't too long ago that individuals and couples would shop for a home and simply buy what they liked and qualified for without giving a thought to devaluation. But before we start waxing nostalgic for that recent history, let's also acknowledge that people are famously fickle -- or at least differentially selective -- when it comes to perceived future value.

One of the reasons that the existant housing market has been slow to recover is that no one knows if their sector of interest has yet hit bottom. This results in that favorite tool of house valuation, local comparative recent selling prices or 'comps', effectively driving down prices one house at a time. So here's just one irony: The same individual or couple who's afraid to buy a house, typically doesn't hesitate to buy a new car, knowing full well it will lose at least 10% of it's value at the moment of purchase. This selective analytic behavior becomes even more difficult to grasp when looking at home improvement decisions.

Now I'm not advocating building a kitchen, man cave or family room addition to an existing home if the market value / mortgage balance ratio is less than 1. But just like a new car purchase, not everything of personal value can be measured in ROI or it's impact on total personal assets. Quality of everyday life need not and cannot always be measured in dollars and cents. Surely we accept this non-monetary logic when vacationing and dining out, so why not apply at least some of this thinking to our homes and do our bit to incrementally improve the economy in the bargain.

Some people are doing just that. Today's WSJ reports that "...everything from minor sprucing up to full-scale remodeling rose modestly in 2011...mark[ing] the first year since 2006 that such spending increased." And even more interesting is the case of a couple in San Marcos, California who "bought their house in 2004 for $565K, and esimate it would fetch just $400K today." Despite the negative variance if this couple sold today, they like their house and neighborhood and will soon "begin construction on a $40K garden with native plants and a patio to replace [their] disheveled yard." And their landscaper confesses that such "remodeling jobs are keeping him afloat."

Keep it in mind. Should you have some extra cash, you not only can't take it with you, augmenting that which already makes you happy could probably make a whole lot more sustained sense -- and cents for that matter -- than moving, buying a new car or taking a lavish vacation.

- William Busch

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