Big bucks sunk into home improvements
Portland homeowners are pouring money into repair and remodeling projects.
According to research by HomeAdvisor, an online contractor referral service, Portland residents money spent on home improvement projects increased 82 percent during the 12 months ending in August, about twice the national average. Local projects grew even faster in the previous year 138 percent.
HomeAdvisor Chief Economist Brad Hunter says the increased spending is directly related to the improving local economy and shortage of houses for sale, both of which are conspiring to drive home prices up faster than in any other city in the country. Some of the work is being done to prepare homes for sale, to cash in on the hot home market. But much of it is being done by people who have decided they cant afford to move now or simply want to take advantage of their improving financial circumstances and record-low interest rates.
Portland consultant Sheryl Alstrin says she embarked on a long- delayed remodeling project in July, after feeling more confident about her financial future after two good years of work. Alstrin says she had talked with her two teenage children about overhauling the unit she owns in a Southwest triplex for years before finally doing it.
One day my 13-year-old daughter said theyre not going to be here forever. It made me realize, if Im ever going to do it, nows the time, Alstrin says.
Although the project, which involves relocating the kitchen and reconstructing a number of rooms to take advantage of the view of Mount Hood, has crept up to over $100,000, Alstrin says the financing for the work, which is still underway, has been relatively easy to secure.
Alstrins contractor is Darryl OBeirne, the owner of Solas LLC. OBeirne says his work has exploded this year, after increasing steadily over the past four or five years.
People have a lot more confidence in the market. Portland is still undervalued and homeowners are confident what theyre spending is a good investment, OBeirne says.
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Improving economy, rising home prices
Hunter says home-improvement projects are increasing in Portland for several reasons.
The run-up in home prices over the past four years has motivated some people who may have been considering a move to instead stay and improve the house they already have. The rise in homeowner equity has empowered people to upgrade their home. In many cases, they find this to be more economical and less personally disruptive than selling, paying a real estate agent fee for selling the house, moving, and possibly still having to do some home-improvement jobs in both houses, says Hunter.
According to the Zillow residential service and research firm, median home prices in Portland increased 14.8 percent to $338,900 over the past year. There are 12.4 percent fewer homes for sale in Portland than a year ago, despite the fact that an estimated 1,000 people per month are moving to the region.
Hunter says there are several reasons why Portland home values are increasing so fast, including the urban growth boundary that limits where development can occur, which drives up land costs.
Demand is high and land is scarce, says Hunter.
HomeAdvisor pulled its data from the millions of service requests it receives every year. Although the company doesnt reveal its figures by city, Hunter says it includes thousands of service requests in Portland.
According to Hunter, a good deal of the work appears to be maintenance that homeowners deferred during the Great Recession. For example, in each of the past three years, HomeAdvisor has noticed an especially large increase in Portland for relatively low-cost or handyman types of help, such as repairing or replacing faucets, fixtures, insulation and pipes, as well as electrical switches and outlets, and other small items that were annoying but not critical.
Roof repairs and replacements are another major deferred-maintenance category where work is increasing, Hunter says. That includes both non-emergency maintenance and new roofs, where homeowners are spending an average of $7,480. But many homeowners are paying for higher-quality shingles, suggesting they are intending to stay put for awhile.
Another big-ticket item is kitchen remodels, where homeowners are paying an average of $16,817. But thats 15 percent less than the national average, suggesting much of the work is being done to prepare a home for sale with what remodelers call a face lift, which includes refacing instead of replacing cabinets.
Alstrins spending on her kitchen will easily top that. But she says the new location is more suited for the layout of her unit, making it an even better place to live for years to come.
One category even more closely related to sales is landscaping, which is also increasing. Hunter says such projects are frequently done to increase a homes curb appeal.
Comparisons with Seattle
According to Hunter, home-improvement projects are increasing faster in Portland than Seattle, another West Coast city with a hot real estate market. Seattle is up 73 percent over the past 12 months, nine points less than Portland.
Seattle homeowners have different priorities as to where and how to spend their remodeling dollars. For example, Seattle homeowners spent an average of $25,663 on their kitchen remodels over the past year, nearly $9,000 more than Portlanders. Homeowners here are more pragmatic, increasing their spending for gutters, downspouts and energy efficiency projects faster than people in Seattle.
Comparing the types of home-improvement projects in Portland with Seattle, we have noted that Portland home-improvement projects tend to be more pragmatic less conspicuous consumption spending and more necessary home fixes and maintenance items, Hunter says.
OBeirne says he is also converting a lot of unused spaces in existing homes into accessory dwelling units that can be rented out.
Portland is so popular, people already have them reserved through the end of the year, OBeirne says.
Despite the rapid increase in Portland home prices, Hunter says first-time buyers can still get lucky by looking for fixer uppers and doing the work themsleves.
Young couples can make the house livable, and then invest in projects to add to the luxury and beauty of the home over time, as their finances permit. This is an excellent approach for first-time home buyers, from the standpoint of lifestyle as well as equity-building, Hunter says.