A slowdown is also predicted by the Remodeling Activity Indicator, an index created by Harvard's Joint Center for Housing Studies. According to the latest report, remodeling expenditures aren't likely to see much growth until home sales begin to pick up again.

But even though the days of skyrocketing home values may have ceased, most homeowners have more than enough home equity to invest in home improvement. "Consumers should still have the confidence, and they certainly should still have the equity and the financial ability to be able to leverage the home to do home improvement projects," says Bendimerad.

This real estate downturn is so different from previous ones that homeowners should not look to the past for guidance, says Bendimerad. 

"In past economic cycles where we've seen housing prices really take a hit, we saw some pretty drastic price changes," says Bendimerad. "I can understand that it would be hard from a consumer's point of view to justify putting a lot of money into your home if you feel like the value is going down. In the case of what we're seeing now, there has just been so much run-up to home prices within the last five or six years that whatever slowdown we are seeing is really fairly minimal in terms of the impact on home equity from the consumer's point of view."

3. Fewer jobs for contractors
With the slowdown in new construction, more contractors are in the market for work.

"Certainly in more recent times, professional contractors that we've spoken to are starting to feel a little bit of heat under the collar, maybe seeing business slowing, fewer calls for new work and having a harder time finding referrals," says Bendimerad.

For the savvy homeowner, such an environment is an excellent time to find someone to take on a project. Not only are you likely to get lower and more competitive estimates, but you'll likely be more successful negotiating for other favorable terms such as an earlier start date.

Just how much of an advantage you have may depend upon the type of work you're getting done. If you're having a roof fixed or some other necessary repair or renovation done, you might not have as much luck negotiating the price since real estate downturns don't keep people from hiring contractors to do work on their homes out of necessity.

However, if you're looking for someone to add a room to your home or upgrade your bathroom, you might have more luck. "Slow markets are a time when contractors are having harder times getting their clients to do projects -- particularly luxury projects and major renovations to the home, such as the kitchen and bath," says Bendimerad.

Regardless of the type of project you ultimately end up doing, the same rules for selecting a contractor should apply. Seek references and ask for multiple bids to get the best deal.

But by leveraging your home equity and your knowledge about lumber prices and the home improvement climate, you can get the best contracting bang for your buck.