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6 home renovations with major payoffs

Unless Ty Pennington and the crew from "Extreme Makeover: Home Edition" take on your renovation project, you're likely to get weak-kneed looking at the estimate for the work or learning the terms of your home improvement loan.

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If high prices, tough credit or falling home values have suddenly brought your fantasy makeover plans back to reality, the good news is that it's often the more modest upgrades -- not the grand additions -- that offer the best return on your investment.

Another plus is that the sluggish remodeling market might make it easier to find available contractors and get their assistance with financing your project, even if they offer little wiggle room on the bill. Carol Friedhoff, a Certified Financial Planner in Dublin, Ohio, notes: "A lot of the builders are having to make extra concessions, trying to come up with creative financing."

6 renovations with major payoffs
1. Exterior siding replacement
2. Deck addition
3. Simple kitchen upgrade
4. Energy-efficient windows
5. Bathroom facelift
6. Crown molding

The February 2008 Leading Indicator for Remodeling Activity report from the Joint Center for Housing Studies at Harvard University projects that homeowner spending for home improvements will continue to decline, slipping at an annual rate of 2.6 percent through the third quarter of 2008.

"Contractors are much hungrier for the business now, much more responsive and more willing to negotiate on scheduling and things like that," says Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies.

"I'm guessing there will be some negotiating on pricing, too, but their labor costs have probably not gone down and their material costs have by and large gone up."

In other words, don't expect a big break on the price, but do look for more accommodation in other areas such as financing.

Homeowners are taking their time deciding whether to remodel, says Michael S. Hydeck, president of Hydeck & MacKay Builders Inc. in Pennsylvania and treasurer for the National Association of the Remodeling Industry. "The backup for projects and jobs is a lot smaller than it was a year or two years ago," Hydeck says. "Most people are thinking and waiting."

Waiting might not be such a bad thing, according to Friedhoff, if it means you can save enough money to pay cash for your project instead of having to borrow. "There's a lot less risk, and you don't have the possibility of owing more than the house is worth," she says.

If you're still mulling over your renovation options, here are six projects that can bring you a good value for your money.

1. Replace your siding
Exterior siding topped the list in Remodeling magazine's 2007 Cost vs. Value report, which compared the construction costs of various projects to estimates of their resale value by members of the National Association of Realtors. Fiber-cement siding replacement came in at No. 1, with an estimated 88.1 percent of the cost recouped, while vinyl siding replacement had the third highest recoupment value at 83.2 percent.

Introduced nearly 100 years ago, fiber-cement siding is back in vogue, with cellulose replacing the asbestos of long-ago versions. The new and improved product is weather-resistant and extremely durable, says Tim Carter, a syndicated columnist who dispenses home improvement advice on his Web site

Next: "Just like all real estate is local ..."
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