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A broken dishwasher used to be a great excuse for homeowners to remodel a whole kitchen. Not anymore. Now, says remodeler David Pekel, a broken dishwasher means that the appliance alone needs replacing. And that’s it. The tentacles of the recession have reached into the remodeling industry, changing the dynamics of decision-making and the purview […]

A broken dishwasher used to be a great excuse for homeowners to remodel a whole kitchen. Not anymore. Now, says remodeler David Pekel, a broken dishwasher means that the appliance alone needs replacing. And that’s it.

The tentacles of the recession have reached into the remodeling industry, changing the dynamics of decision-making and the purview of projects. Remodeling is still a draw, but now industry players see homeowners working within the original geography of a room and making choices that deliver maximum bang per buck instead of gutting a room or knocking down walls.

Necessity is also driving some remodeling. People don’t feel comfortable moving right now, but some improvements make a home more livable while raising equity for an eventual sale once the market recalibrates.

In the past, homeowners might have done a complete gutting of a room, which for a bathroom entails pulling out the tub, the toilet and the vanity, says Diane Ausavich, president of the Milwaukee chapter of the National Association of the Remodeling Industry.

“Now, they’re staying more within the confines of that existing space,” she says, often just refreshing the room with a new coat of paint or a new floor. And when people do make changes, they are doing them with a potential sale in mind.

“One of the things we have noticed is that people are still doing their kitchen or bath, but they’re doing them in neutral tones,” she says. The logic: The house will be ready to go when the market shifts back to center and won’t be hindered by bold customizations.

Smaller projects offer more potential return on investment and make more sense now than they did during the boom.

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Thanks to a government tax credit, “window replacement has a very high return on investment,” says Pekel, the president of Pekel Construction & Remodeling in Wauwatosa. But so does upgrading mechanicals such as the heating, cooling and electrical systems, given the energy savings, he says.

The recession has also altered how homeowners plan remodeling decisions.

“People are doing a lot more research now,” says Ausavich. Homeowners come in for projects with make and model numbers of what they want installed; they come in with tighter budgets.

And Pekel notes, “There’s not the same urgency to get the project off the ground” that existed during the mid-decade’s go-go years for residential real estate.

“People don’t have equity in their houses now, so it’s harder to move up,” explains Richard K. Green, director of the Lusk Center for Real Estate at the University of Southern California. That gives an impetus to remodeling because costs are lower than a full-scale move.

In the recent past, “some people chose just not to do remodeling projects,” says Kevin Anundson, president of OAR Group, an Elm Grove residential remodeling business. Now, they look to remodel rather then sell.

“A lot of remodelers are starting to see a pretty significant uptick in their business,” says J. Scott Mathie, vice president of government affairs at the Metropolitan Builders Association in Waukesha. In particular, there is much more interest in smaller to midrange projects that up a home’s curb appeal or make the home more comfortable for owners unable or unwilling to jump into the market, he says.

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Big Bang, Small Bucks
Percentage of remodeling expenditures for midrange projects that homeowners are likely to recoup on resale:

81% Deck addition
72% Major kitchen remodel
71% Bathroom remodel
61% New roof
65% Family room addition
65% Master suite addition

Source: National Association of Realtors, REALTOR magazine, 2009 national data

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