Americans resume home improvements that can be both good property investments and good for the community.

American homes will receive some badly needed TLC this year as part of a property investment trend that can build home equity and stabilize communities, say financial and industry experts.

More than one-third of affluent investors surveyed in January say they are planning a major home improvement in 2011, according to Spectrem Group, the leading authority on wealthy Americans. Spectrem found that the affluent were much more likely to improve their homes than buy a car, computer or second home.

As Americans resume property investment projects tabled during the Recession, they will pull the remodeling industry out of a three-year slump. Spending on home improvements will grow by 6.5 percent in the third quarter of 2011, according to the Leading Indicator of Remodeling Activity. LIRA is compiled by the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University.

The center foresees a sustainable recovery for the remodeling industry and attributes the gains to favorable interest rates, a pickup in home sales and a strengthening economy.
The National Association of the Remodeling Industry has also identified positive trends for 2011. NARI has found that home owners are most likely to tackle smaller projects. Some are calling 2011 “the year for the bathroom update.”

Homeowners are also more likely to tackle “must do” repairs, such as fixing a leaking roof, which cannot easily be delayed. Contractors are also seeing an increase in investors who are staying within a fixed budget and paying in cash, reports NARI.

Americans should think of their homes as property investments, according to information provided by the U.S. Department of Housing and Urban Development (HUD). A well maintained and improved home is more likely to increase in value, and can also help make the entire neighborhood more desirable.

HUD recommends that homeowners planning improvements buy good quality materials and leave skilled jobs to professionals. Contractors should be chosen with care and researched through the local chamber of commerce, Better Business Bureau or other consumer protection agency.

Homeowners interested in starting a remodeling project are wise to carefully consider their financing options:

• Savings: Both HUD and Consumer Reports, a leading advocacy group, recommend paying for home improvements in cash whenever feasible. Though cash can be the cheapest option, homeowners should consider the opportunity cost of paying in cash. Does the earning potential of the cash exceed the cost of borrowing? If so, it may make more sense to use credit.
• Home-Equity line of credit: HELOCs can be used for many types of remodeling projects and credit can be taken out as needed and repaid over a period of years. The products provide quick access to cash in the case of an emergency. HELOCs come with a floating interest rate that goes up and down with the prime rate.
• Home-equity loans: These loans provide a fixed amount of cash at a fixed rate, but can charge closing costs.
• Credit Cards: traditional credit cards make sense for smaller projects that can be repaid quickly, but the relatively high fees make them a costly alternative for the long term.

The remodeling industry has not experienced the same volatility as new construction. In 2009, remodeling spending was down 20 percent from its peak in 2005, reports the National Association of Home Builders. New construction was down 72 percent over the same period. Federal energy conservation tax credits are partly credited for stimulating remodeling through the recession. The aging stock of homes and difficulty selling homes are also factors