By Kelli B. Grant – Market Watch

No longer content with new cabinet pulls or a fresh coat of paint, homeowners are beginning, again, to dabble in home remodeling projects.
Contractors say they’re getting more requests for upgraded kitchens and bathrooms, as well as home additions and major improvements that cut energy bills and reinforce structures against storms. It’s a significant shift from recent years, when homeowners were focused on only vital home repairs, “preserving the investment you had,” says Steve Melman, the director of economic services for the National Association of Home Builders. The NAHB’s forecast expects a 2.4% increase in remodeling spending this year among single-family-home owners. Harvard University’s Joint Center for Housing Studies has a rosier outlook. Residential spending on additions, remodels and other major home improvements for October 2012 through September 2013 is expected to tally $145.5 billion, up 19.6% year over year, according to a January report.

Even as remodeling rebounds, however, consumers are looking for ways to save. Prerecession-style, “blowout” renovations like creating a master bedroom suite or multiroom home addition pushed the average remodel tab to between $250,000 and $350,000, says Justin Mihalik, the second vice president of the New Jersey chapter of the American Institute of Architects. Today, the average for bigger projects runs about $100,000 to $150,000, he says — and many people are spending far less. Four trends that are reshaping remodeling:

Cash Beats Credit;

Homeowners are largely capping the budget at whatever they’ve saved up. That’s because financing isn’t as readily available as it was during the last remodeling boom — nor can people easily wrap the costs in when refinancing a mortgage, says Bill Shaw, chair of the NAHB’s Remodeler Council and owner of Houston-based firm William Shaw & Associates. Not only has paying in cash led to less expensive projects; it has also fueled the trend of mini remodels, where homeowners tackle, say, just the kitchen cabinets, with the intention of getting new appliances or flooring later, says Sean Murphy, DIY expert for home improvement retailer Build.com. “It’s easier on the wallet,” he says. But consumers should still plan out the whole project in advance, to avoid extra work and costs down the line from elements that don’t match up, such as new cabinets that won’t fit the new, bigger fridge.

Livability, Not Resale Value:

Unlike in boom times (or during the “house-flipping” craze), there’s less focus now on the added value a remodel might bring at sale. For virtually every residential remodeling project, “if you sell within a few years, you’re not going to recoup 100% of the cost of that project,” says Melman. According to Remodeling Magazine’s 2013 Cost vs. Value Report, the typical recoup is just 60.6%. That’s up nearly three points from 2012 — and represents the first increase since 2005. With more consumers thinking about long-term livability, experts are getting more requests for smaller-ticket projects that don’t typically add value at sale anyway, such as mudrooms, innovative kitchen storage and outdoor spaces. Older adults who have rethought selling have also created a bigger market for aging-in-place renovations such as grab bars, step-free showers and even elevators, says Tom O’Grady, chair of the National Association of the Remodeling Industry’s strategic planning and research committee and owner of Drexel Hill, Pa.-based O’Grady Builders.

Practical Upgrades:

Premium prices for energy- or water-saving appliances and fixtures have come down over the years, making those upgrades more attractive for long-term-minded homeowners. Annual savings for a low-flow or dual-flush toilet average $50; a water-conserving faucet, $220, says Murphy. Energy-efficient roofs, siding, windows and doors are equally popular projects, says Mihalik. (Currently, homeowners can claim a credit for 10% of the cost, up to $500 total, of qualified projects, including insulation, water heaters or roofs. Projects must have been completed during 2012 or 2013. Find details at Energystar.gov ( energystar.gov ). Storm-proofing upgrades, such as wind-resistant roofing, built-in generators and basement drainage, have also gained traction. “It’s exploded since Hurricane Irene in 2011,” Mihalik says. The hope, he adds, is that the investment will help homeowners avoid or limit damage in future years, and maybe cut their insurance bills. But even consumers who aren’t specifically looking for energy-efficiency or storm-proofing may find they need to budget for them. Depending on where you live, upgraded building codes now often require some such features.

Casting a Wide Net:

During the fourth quarter of 2012, remodelers reported a 3.9% increase in inquiries over the previous quarter, according to the NARI. But the number of bids that turned into actual jobs was slightly behind, up 3.5%. “It’s taking much longer to close a sale,” says Shaw. Where boomers might talk to two or three contractors at most, younger couples are meetings with at least twice as many. Recently, Shaw says, he met with a homeowner who had initially reached out to 20 contractors before soliciting bids from seven. “That’s unheard of in previous years,” he says. Experts say plenty of contractors left the industry during the downturn, but work is still limited enough that it’s worth the effort to shop around and get multiple bids. Homeowners’ best bet is still referrals from friends or family who have had work done, says O’Grady. “In the downturn, we lost an awful lot of remodelers that didn’t use the best business practices,” he says. “Anybody that’s low-balling a number today? Either they don’t know their costs or they’re going to come back with a tremendous number of change orders.”