How can I renovate in a recession?

You would think a bad economy would be the wrong time to renovate, but it actually may be the perfect time to find the best deals. See more home design pictures.

In recent years, many homeowners bought what should have been their starter home. They would stay in it a while to let it gain some value and then sell it for a profit and trade up to their "forever" home. Sometimes the starter home got a few upgrades to improve the value. Other times, it was left as is. But the bursting of the real estate bubble in 2007 and 2008 put a lot of homeowners in a bind. All of a sudden, it was no longer possible to sell to the highest bidder for a big profit.

During the boom, contractors and builders had their hands full with new construction. During the downturn, however, demand decreased, home loans dried up and builders found themselves with a surplus of empty homes. The Joint Center for Housing Studies at Harvard University indicated that spending on home improvement peaked in 2006 and fell during each quarter after this. The center estimates that by the third quarter of 2009, there will be an annual decline of 12.1 percent in home renovations [source: Harvard].

One result of the housing mess is people are staying in their houses longer. With contractors out of work and materials dropping in prices, a recession is a pretty good time to renovate that starter home, as long as the project will add good value for minimum investment. Tackling a few fix-up jobs around your house allows you to enjoy it more until the market picks back up and adds value to your home in the process.