Will your remodel pay off?
Leaning toward a remodel? Don't press ahead just yet. You'll want to make sure that your project adds value to your home -- ideally, value you can recoup when you sell.

"You don't want to go overboard and make your house the most expensive in the neighborhood, because, from an investment perspective, it will be harder proportionately to recover those costs," says Maloney.

Loren Stiner, a master appraiser and instructor at the Lincoln Graduate Center in San Antonio, agrees: "Bring it up to the neighborhood average. If you get above that, the people who live in that area don't have the income to pay your price. You have to look at who are the buyers in your area."

Corcoran agrees. "The rule of thumb if you're going to improve and modernize your house is to spend between 20 and 30 percent of your house value," she says. "It sounds like a lot and it's usually more than people think they're going to spend, but by the time they go down that path of saying, 'Well, if we're going to do this, we might as well do that,' in the end people typically spend 20 to 30 percent."

Corcoran calls 20 percent a green light, 30 percent a stop sign: "That's where people tend to overimprove and make it too personal. People will make the worst mistakes based on their own personal interests."

But the work's not over, yet. Next, you need to estimate what your specific improvements will add to your property value. Corcoran says the best way is to attend open houses and shop your local market with a real estate broker to price homes with the same amenities yours will have after the remodel. And check online as well: Zillow.com will even price your neighbor's houses for you.

"If your house is worth $400,000 and you're thinking of putting in another $80,000 in improvements, it's really worthwhile to see three other houses in your township that have those improvements and are selling for $500,000 or $525,000," she says. "That's a green light; you know you can put that money into your house and get it out immediately. If you don't find that's the case that may be a cautionary note to scale back."

It's also a good idea to check out Remodeling magazine's annual Cost vs. Value report to see industry estimates of what you can expect to recoup for your particular project.

Sheehan says putting money into your home may be the most prudent course in the current transitional market.

"Assuming you're going to stay in the same area, remodeling makes a lot more sense now than buying, because, if you sell, you're going to have a transaction cost, and if you buy you may not have made enough on your appreciation to offset it. You may not make as much out of your remodeling -- the rate of return isn't great -- but it will be better than selling your existing property and buying a new one."

Jay MacDonald is a contributing editor based in Mississippi.