From Daniel T on June 1st, 2010 in Remodeling News
In the last couple of days, you may have done something like this. You’re standing at your kitchen doorway. Hand resting on the doorframe. Head tilted slightly. Deep in thought. The thought process goes as it has before: “Wow, the floor looks hideous. I know that oven needs to be replaced. Wouldn’t a stainless fridge look much better? The counter space in this kitchen is driving me crazy. Whew, does it ever need more light?!” It’s called the remodel dream. Everyone experiences it, so don’t feel bad about admitting that you do it, too.
Such musings are not a waste of time. But musing needs to go beyond the daydream stage and into the actual get-it-done stage. In order to do so, you need metrics. With some of the numbers recently trickling in, there is suggestion that the economy may be offering you a silver plate with the word “remodel” on it. The numbers look very good indeed.
Here’s what’s going on.
The interest rates are very low right now. Admittedly, nabbing a loan requires a decent credit score, but if you do get a loan, it will be a good one. A 5% interest rate is basically too good to pass up, since the interest rate is only going to increase from where it currently is.
Loan rates alone don’t give you the green light for a construction. The price tag on construction costs are also a big factor to consider. What has happened to costs? Over the last few years, they have bottomed out. In fact, they can’t get any lower than they are. In a reversal of the trend, construction costs have not gone up for several years. They are now at a three-year low, having dipped multiple percentage points since their high in 2007. What you’re looking at right now are rock-bottom construction costs.
But the good news is about to be over. Construction costs are on the rise again. In fact, with a 6% annual increase in construction costs, you’re looking at a major price tag for the same project if you wait another year or two. The message again is clear: the timing is too good to pass up.
One final number to remember. You know what inflation is? Yes, it’s usually a bad thing. For your home, however, inflation is a good thing. If inflation hits the 10% mark (which it’s on the trajectory to do), the value of your home will correspondingly increase. You know what better home values are about—more net worth. A better home (i.e. remodeling it) plus inflation means that now is the time to remodel.
Low interest rates. Low construction costs. Property value rising.
It definitely looks like now is the time to remodel, especially since all of those three numbers are on the move in a way that will negatively impact your remodeling job.
Stop staring at the kitchen and start making some phone calls.