How to Plan Home Improvement Projects So They Are Affordable

Renovation costs have soared out of control - even in the current recession. You'd think that renovation costs would be less because fewer home improvement contractors are employed. But that doesn't seem to be the case.

Consumers, mindful of renovation costs are staging their home improvement projects. Doing home improvement projects in phases lowers renovation costs.

You'd think that renovation costs would be less because home improvement contractors aren't that busy working on other home improvement projects, and there are plenty of raw materials like drywall, lumber, and concrete.

But there are several reasons renovation costs have stayed relatively high:

• Many home improvement contractors have gone out of business. While quality contractors have stayed busy, many of contractors and sub-contractors have had to leave the business to find other work. That means less competition, which is why prices for home improvement jobs haven't come down as much.
• Homeowners' incomes have fallen.Millions of jobs have been lost since 2007 and many of those who have jobs have been asked to take significant paycuts.
• Access to credit is far more limited. Banks have taken a bath on home equity lines of credit (HELOCs) and home equity loans. According to report from Deutsche Bank, homeowners tapped 25 to 30 percent of every dollar of equity they gained during the boom years. With property prices falling, banks have capped or closed millions of home equity lines of credit, as well as lowering credit card lines of credit. That has limited homeowners' ability to borrow cash to pay for renovation costs.

With limited income and limited access to credit, homeowners have had to either cancel home improvement projects, or manage their renovation costs by doing their project in phases. According to a recent Consumer Reports poll, 36 percent of homeowners plan to do a remodel in several phases to hold down renovation costs.

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