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A Smart Investment during the Global Recession - Upscale Home Improvement

 

The recent economic crisis has caused great casualties in housing market as well as in the broader financial system, making the investment a tough task among average households in the United States. Mutual funds are on continuous devaluation; stock markets show great volatility; and business expansion is lacking directions. Indeed, investing for the future has become a beautiful dream of most middle class families. 

However, there is a seemingly small but potentially valuable area where average households could put their cash in. This area is home improvement or remodeling. Particularly, it is predictable that an investment in up-scale home improvement now can potentially yield significant returns on asset value in the near future. Let's use natural stone, a type of traditionally luxury architectural materials, as an example to explain why. 

Natural stone supplies in the United States have been heavily relied on importations. China, India, Italy, Brazil as well as numerous nations in the middle east are major exportation countries in global stone industry. Since the crisis began in 2008, market demands for such once considered prestige building materials in world's largest markets of the US and Europe have been shrinking in a staggering pace. This negative industrial situation nevertheless provides a great investment opportunity for the homeowners in the United States.

 
 

1. Shrinkage in market demand has prompted fierce competition in manufacturing sectors and drove prices down significantly.

Such competition in stone industry is much worse than average as stone industry is the closest sector to the housing market. A large majority of stone factories in China are now operating in less than half of their full capacities. They have to compete intensely for very limited orders available in the market in order to survive. This type of unprecedented market competitions have driven the prices of stone products in almost every category down to a rock bottom level.

For examples, a deluxe hand carved marble fireplace would cost $5000 minimum when economy was booming. It was for privileged few to decorate their mansions. But you can buy it now for a price as low as $2500 delivered, which is not much more than a set of regular wood fireplace mantel surround. You can also get granite floor tiles for less than one dollar per square feet if you need fairly large quantity. These extremely low prices make remodeling homes with natural stones an excellent investment.

2. China's exportation stimulus plan has further pushed overall prices of exporting goods lower.

Since the global recession started, Chinese has takes a series of stimulus actions in an attempt to stabilize export business. benefited sectors included building material and stone industry. The most important measure in the plan is vast preferential tax rebates on export transactions. The rebate rate for stone products rate been increased from 6% to 12% recently, providing stone manufacturers additional room to slash prices. Government compensations for exporters in China certainly will be conveyed to the market and benefit consumers in the United States. So it is a good time for American homeowners to take advantages of this type of indirect "Chinese government subsidizations".  

 
 

3. Factory's under-capacity operation enables them to improve quality control and cut production time.

When a factory have significantly less orders than their capacity, they don't have to rush production process. This is in fact a great advantage for consumers in term of workmanship and quality control. We have noticed, comparing to the situation in the great expansion period,  the factories in China in general have to a large extent improved their production quality and accuracy.

There is another obvious advantage that the current weak demand can bring to  the consumers, i.e., shorter lead time for producing your orders. In the past, it would typically take a factory 6 to 8 weeks to carve a marble fireplace, which can now be cut to 4 weeks in average. 

4. Weak economy and dismal job market have reduced labor costs in the building industry.

Reduced average labor cost in home improvement market is another advantage homeowners can take during this economic crisis. In addition to building materials, labor is another major part in the overall costs of a home remodeling project. Just like factories overseas are dying for orders, building contractors in the United States are starving for projects. You can always find quality bargains in this extraordinary time.

To summarize, now is a good opportunity for homeowners to invest in the upscale home improvement projects. Comparing to those good times, you can expect to spend a fraction of money to have quality jobs done. The broader economy will recover. There is no question about it. Like gold, marble, granite and other stones are naturally formed. Their values can always be preserved. Their quality will never deteriorate. If you have your home improvement done during this economic trough, the potential appreciation spaces will be amplified when the housing market starts expansion again.  

Therefore, home improvement is a great investment idea during such a economic downturn.

 
 
 

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