The home equity-financed home improvement boom of the first part of this millennium has come to a halt, and that wood paneling in the dining room is likely to stay there until the economy improves.

Harvard University's Joint Center for Housing Studies reports that spending on home improvement projects will decline at annual rate of 12.1% in the third quarter of 2009, following a 4.5% decline in 2008.

There are a few factors behind the decline. Home equity loans are harder to get and the pace of home sales has slowed considerably -- a lot of people remodel shortly after buying a home so fewer home sales means less remodeling.
But one other part of it may be psychological. Most Americans have watched their homes decline precipitously in value over the past couple years, and that's leaving them less willing to pamper their properties. People used to love their homes for making them rich. Now we hate them for making us poor.

For homeowner's finances, the decline in remodeling is good news. One of the popular myths of the housing bubble was that remodeling was an "investment." Shows like HGTV's My House is Worth What? made it sound like spending $15,000 remodeling a bathroom increased the value of the home by more than the cost. But objective research shows that that just isn't true. Of course renovation makes homes more desirable but it tends not to add enough value to justify the cost. And remember: If you aren't selling immediately, the value of that new vanity will depreciate over time, making it an even worse investment.

It's a recession and people are learning to cut back in all areas of their lives. Many will likely find out soon enough that Formica counters and brass bathroom fixtures aren't quite as bad as we'd come to think they were during the boom years.

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