The Refinance/Renovation Effect
In 1998-2003, low interest rates ignited record home refinancing, many homeowners pulled "cash out" to reinvest in their homes:
A $100,000 home in 2000, with $60,000 in debt may have been refinanced to $75,000 (75%), with $15,000 cash out going right back into the home in capital improvements. This home then sold for $120,000 in 2001, wealth was created, but less than the statistics assume. Did it rise by 20% in "appreciative" value? Or did the improvements and borrowing just increase the value? National statistics measure this as a 20% rise. You decide, then multiply by your neighbors who added additions to their 1940's bungalows between 1999-2005. If the national appreciation rate was recalculated to account for home renovation expenses, real gain in value would be determined and would be a much more calming and useful statistic to determine if housing is 'overheated'.
The Redevelopment Effect
America's housing stock in 2000 was on average 47 years old. The rise in Home Depot stock should be a market indicator of what Americans are shopping for - home improvement. Dollars invested in improving the family home is a form of savings and investment that doesn't show up in the savings statistics.
At the same time urban areas are seeing unprecedented re-gentrification. When a blighted area is improved, and made habitable again, values go up from zero. The calculated appreciation rate is spectacular. The tax base comes back and since many of these areas are in city center cores, travel commutes are shortened for the new residents. The value to society of redevelopment is significant. Boomers are looking to the old neighborhoods for value and projects with heart. Loft housing will be a popular trend for 50-somethings just as it has attracted 20-somethings, and is another form of Besting.
from the new book: "Besting - better nesting" http://www.betternesting.com
