Unlike last week’s Top 8 Home Upgrades According to Kiplinger, this comes straight from homeowner surveys. What’s even better is that the data is broken down by region, so we’re not getting a national average but instead, we receive numbers that better represent home improvement costs right here in Louisville, Kentucky.

So let’s get started!

The top five, mid-range home improvement projects for Louisville home owners are:

1. Entry Door Replacement (steel) – 128.9%
2. Attic Bedroom – 83.1%
3. Deck Addition (wood) – 80.6%
4. Siding Replacement (vinyl) – 79.9%
5. Minor Kitchen Remodel – 78.3%

Below is the full list:

Now let’s look at the top five, upscale home improvement projects for Louisville home owners are:

1. Siding Replacement (fiber-cement) – 83.6%
2. Siding Replacement (foam-backed vinyl) – 79.0%
3. Window Replacement (vinyl) – 76.5%
4. Window Replacement (wood) – 71.5%
5. Grand Entrance (fiberglass) – 68.8%

Here’s the complete list:

Similar to last year, siding and window-replacement win the day. Still, it’s interesting to see the numbers of the mid-range gain on the upscale home improvements. Also note that almost all 2009 numbers are down from 2008.

Selling your Louisville home these days often means making it “move in ready.” Today’s buyers don’t want to fix things up right away.

Here’s an interesting CNBC spot on the stats that show homeowners aren’t cutting prices like they have been. Looks to be another sign that we’re nearing the end of this housing recession.

As always, keep in mind that the Louisville real estate market doesn’t experience the wild highs or lows that plaque other parts of the country (see this post).

Let’s put aside the discussion about the money you’d gain by buying a new house at this low point in the market and focus on which mid-range home improvement projects are going to give your Louisville home the best bang for your buck.

According to Kiplinger, these are the top eight home improvement projects.

1. Reface Your Kitchen Cabinets
Rather than redoing the entire kitchen for $25,000-$50,000, resurfacing your cabinets is an easy, cost-effective upgrade. Having your cabinets repainted will cost you between $4,000-$6,000, but handy homeowners might tackle the project themselves.

2. Replace the Sinks and Faucets
Kitchen sinks may get no respect, but they sure get a lot of use. Sinks have come a long way in design and function. The current trend is toward undermounted sinks (shown here), which looks great and are easier to clean. Such cast-iron and stainless steel sinks cost around $1,000.

3. Replace Your Countertops
Improved laminate countertops are the more affordable options at $25 to $50 per linear foot and silestone carries a $50-$125 per linear foot price tag. For a more expensive designer look, concrete or recycled glass might be attractive options.

Three projects complete and your Louisville kitchen is looking great! Now let’s tackle the bathroom!

To wit, the way fixed-rate mortgages are structured the lion’s share of your first decade’s payments are for interest payments, not to build home equity. Each time you refinance you reset the clock to zero, starting the interest-heavy period all over again.

If interested, read the whole piece because it includes a real life example.

From the Home Builders Association of Kentucky (HBAK) comes further explanation.

House Bill 394, filed by Rep. Tommy Thompson, and co-sponsored by Rep. Bob Damron, Rep. Scott Brinkman, Rep. Ron Crimm and Rep. David Osborne, passed unanimously out of the House Appropriations & Revenue Committee, and will move to the Senate after passage in the full House.

This bill allows qualified buyers of new homes to utilize the state tax credit of up to $5,000 in conjunction with the Federal First Time Home Buyer Tax Credit of $8,000 for first time home buyers and $6,500 for repeat home buyers.

Prior to its passage, the bill was amended in Committee to also be retroactive for those individuals who were unable to take advantage of the state tax credit due to language incorporated at the Federal level in November of 2009, which inadvertently made the state tax credit of no consequence.

Update 5/12: House Bill 394, sponsored by Rep. Tommy Thompson, has passed the full House and is now in the Senate, where it will be taken up in the Senate Appropriations & Revenue Committee.

We’re getting mixed results in February compared to January. Most areas saw total sales drop but home values increase. For the entire market, average home prices moved up approximately $2700 (not seasonally adjusted).

As always, if you have any questions, please don’t hesitate to contact me.

February 2010

AREA	SALES	AVERAGE	DoM
0 Central Downtown District	10	$134,550	102
1 Downtwn/Old&WestLouisville/Shively	59	$42,211	35
2 Butchertown/Highlands/Germantwn	53	$202,696	88
3 Brownsboro/StMatthews	38	$257,989	106
4 Pleasure Rdg/Valley Station	42	$89,560	86
5 Auburndale/Fairdale/Iroquois Park	34	$116,618	114
6 Buechel/Highview/Okolona/FernCreek	75	$124,810	77
7 FernCrk/Hikes Point/Jeffersontown	60	$190,029	71
8 Hurstbourne/Middletwn/Anchrg	44	$260,789	102
9 Anchrg/Lyndn/Prospct/UpRvrRd	45	$212,863	105
11 Bullitt Co.	48	$135,864	81
19 Spencer Co.	12	$160,986	116
20 Oldham Co. – North	16	$281,576	92
21 Oldham Co. – South	16	$187,825	91
30 Shelby Co.	20	$195,555	123

Source: MetroSearch, Inc. Values are not warranted by LHB.

I was having a conversation yesterday with a very intelligent person about the value of their home. It was during this conversation that I was reminded that while I think about the home valuation process quite often, most people do not. There are many Louisville homes for sale and determining value is critical right now.

After we had been talking for a while, this person asked me to give them the value of their home. He asked it in such a way that it told me he thought there was an exact, singular dollar amount “value” for his home, so I knew we had some “talking to do.”

Simple Principles of Home Valuation

The value of a home depends upon the paradigm of the viewer (the “valuer”). I always like to think that there are four different ways that we can value a home, and homeowners and real estate agents need to marry-up their current motivation levels to determine which value is right at the present time.

Cost is the amount of money that it would take to replace the home today. This number is an estimate of what you would have to pay for a “replacement” home site similar to the one in which the home is sitting, as well as what you would spend to build the actual structure(s) on the property. It is always important to look at this “cost approach” to home valuation so that you don’t kid yourself on what potential buyers could do were this home not available for purchase.

Price is the amount of value established by the homeowner and the listing agent. This is an arbitrary figure that could or could not represent a value that potential buyers would feel compelled to view and potentially purchase the property.

Value is what the property is worth to someone. If you have been in the real estate business as long as I have, then you have heard a few stories about somebody who paid an amount for a home that seemed to be “crazy high” compared to what else was happening in the market.

Market Value is a price range that appeals to many buyers and causes a sale to occur within a reasonable time frame. This is the value that serious home sellers should be seeking from their real estate broker. A Current Market Analysis (CMA) is the report that details the finding of a broker or real estate agent.

Value And Motivation Go Hand In Hand

The most important thing for a homeowner to understand is that their current motivation is the most critical factor when determining the value of their home. In order to illustrate, let us look at three common situations in which many potential home sellers find themselves:

• “If I could get a certain amount from the sale of my home, then I could afford to buy the home in the area in which I have always wanted to live.” This is an example of a home seller who has the luxury of setting a price to see what will happen. Unfortunately, this seller will not get their home sold in today’s real estate market, where supply is way too high to generate enough activity to get this home viewed by serious home buyers. Often times, we say this seller will be the “highest bidder on the house,” meaning the seller values the home more than buyers do.
• “I know the Johnson’s sold their home down the street for $X, and my home is as nice as that, so I will ask for $X as well.” This homeowner is hoping that a past event will re-occur again in the form of another home sale. And it might. Of course, it most likely will have no bearing on what will happen in today’s real estate market, with a different buyer. Typically, prospective home buyers choose what they feel is the best value on the day that they make their home buying decision. Therefore, the fact that prices have been dropping paired with an abundance of choices for home buyers suggests that this seller will not receive an offer either.
• “I need to be out of this home by the end of May to start my new job in Atlanta on June 1st.” This homeowner has a good chance of selling the home as long as he prices his home within a market value range that appeals to many buyers. This price can be determined by looking at comparable homes for sale in Louisville… in other words, his competition, and priced to be the best buy.

The Louisville Home, Garden and Remodeling Show is just around the corner on March 5-7 at the Kentucky Expo Center. Always want to keep my readers up the latest news. If you have real estate related news that you’d like to promote, please contact me.

The Commerce Department said on Wednesday sales of newly built single-family homes dropped 11.2 percent to an annual rate of 309,000 units, the lowest level since records started in 1963, from 348,000 units in December.

Let’s be clear, this statistic is talking about new construction, not sales of existing homes. News isn’t that bleak here in Louisville. Not according to the Courier-Journal who published Louisville Realtors continue sales gains in January this week.

Members of the Greater Louisville Association of Realtors sold 702 houses and condos in January, a 33 percent increase from a year earlier.

It marks the group’s seventh-straight month of double-digit percentage gains from a year earlier.

Color me confused because the very next paragraph states:

With only 529 sales, January 2009 was the slowest month in at least five years, said Lisa Stephenson, executive vice president of the Realtors group.

That seems to contradict the opening paragraphs. When in doubt, I look at the data itself.

Louisville KY Home Sales: January 2009
Number of Houses Sold This Month – 529
Average Selling Price This Month – $160,018

Louisville KY Home Sales: January 2010
Number of Houses Sold This Month – 702
Average Selling Price This Month – $155,995

These statistics should represent residential sales of houses, condos and townhomes in the Greater Louisville MLS.

Just what we’d guess, more sales but at lower prices. Not sure where some of these folks get their data.

Louisville Housing Market Gets National Praise

The Louisville real estate market gets a compliment in the San Francisco newspaper with this snippet.

Other cities which Bay Area residents, weary of the local housing market bubble, might consider relocating to include: Columbus, Ohio, whose suburbs are job-rich and where 87% of middle-income families can afford a home; Louisville, Ky. where foreclosure rates are very low and there is a stable housing market; Houston, Texas where the energy sector has kept jobs going; and Indianapolis, Minneapolis and St. Louis which made the ranking in spite of middling home-price forecasts because housing in these locations is affordable.

Even better is Louisville ranking #2 in Forbes’ Top Ten Best Housing Markets Across America.

1. Pittsburgh, PA
2. Louisville, KY
3. Houston, TX
4. Minneapolis, MN
5. Indianapolis, IA
6. Memphis, TN
7. Columbus, OH
8. St. Louis, MO
9. Dallas/Ft. Worth, TX
10. Austin, TX

I’d say we have a lot to be appreciative here in Louisville. What do you think?

Update: The CJ now makes mention of Louisville and our #2 ranking in Forbes with Forbes.com: Louisville housing market second best in nation.

Louisville follows the same real estate trends as other cities in our nation, only to a much lesser degree. But like I posted earlier this month, Louisville hasn’t seen a drop in home values since before 1978. That changed in 2008 and 2009.

How does the market respond? For the most part, the same as the rest of the country. For starters, new homes are designed smaller. Here’s a snippet from Home Sizes Fall as Builders, Buyers Embrace Economic Reality.

Data recently released by the National Association of Home Builders (NAHB) found the average size of a new home that was completed in 2009 fell to 2,480 square feet from 2,520 square feet in 2008. The last time the average completed-home size fell by a statistically significant amount was 1982.

I can attest to this personally, as my clients that are looking to build are more interested in a smaller house footprint but want the home built with more energy-efficient, green technology.

The other response to a housing downturn is that more homeowners put off moving to a new home and instead focus on remodeling their existing home.

The most popular projects in the past–remodeling the kitchen and bathrooms–have decreased in popularity, as adding a bathroom has taken the honors of the most popular project. This makes sense since, for many homeowners, updating an existing room can be put off because it is often seen as a “luxury,” while for many, the addition of a bathroom is a necessity due to changes in the needs of the family.

Just ask any Louisville home builder how many of their projects are remodels vs. new builds.

As the Louisville market rebounds, this phenomenon will decrease. From the lyrics of a hit 80’s song, “He knows changes aren’t permanent, but change is.”