Should I remodel my kitchen now?

Many homeowners are asking themselves the above question. Many consumers and business owners are asking the same question when it comes to buying a new car or new computer. The media displays catastrophic images of falling home prices, melting real estate market. Recently the media is taking the attack to the next level! The U.S economy is doomed! We are going through a global meltdown!!!

While it is clear to everyone by now that the economy is slowing down, home values are indeed falling, and the financial crisis is real. However, it is unclear how severe is the slowdown? How far are we from the light at the end of the tunnel? How low did home values get? Did home values revert back to 1990s level? Are we at a bottom?

The level of decline differs from one state to another and sometimes between one city to another. In northern New Jersey for example most homes have declined by 15%-20%.
A typical $ 420,000 home have declined to around $ 350,000, that is 17% decline.

On the other hand, a typical bathroom remodeling used to cost anywhere from $10,000 to $14,000. Nowadays, a typical bathroom remodeling is priced between $ 6000 to $ 8,000 - about 50% decline!

Many value driven consumers know that now is the best time to remodel their home. The low cost of home remodeling would not stay that low for a long time. As some of the fly by night contractors (that came about during the sub-prime wave) are going out of the business. Further, the amount of qualified contractors available is decreasing. In addition, investors buying distressed homes and first-time homebuyers (taking advantage of the lowest interest rate in years) are likely to increase the demand for such qualified contractors. The increase in demand and the decrease in supply will result in shortage of qualified contractors. The shortage will drive the price of home remodeling up.

I am aware that many pessimists would critic the above argument. While I do not deny that the argument could be questioned, I would like to suggest the following example.

A few months ago, the auto dealers were struggling to convince consumers to buy SUVs even though the prices of those cars were at very low levels due to the insane $4 a gallon gas price. Today, only couple months later (not years...) the very same cars are selling at much higher prices as people are no longer worried about gas prices and prefer the convenience of SUVs over the tiny gas saving cars.

I am not implying that the housing crisis will be over in couple months. No one knows exactly when it will end but as long as you are able to afford the house (housing payment about 30-50% of your income) you will benefit from buying a house and remodeling it.

If you already own a home, taking advantage of the low interest financing offered by many retail showrooms and contractors will help you remodel your home at great prices while not having to worry about denting your cash position.