Downturn Impact: Higher Profits on Lower Sales?

[original URL: http://finance.yahoo.com/news/Industries-Find-Surging-nytimes-3446245046.html?x=0&.v=2]

Industries Find Surging Profits in Deeper Cuts

On Monday July 26, 2010, 2:29 am EDT

By most measures, Harley-Davidson has been having a rough ride.

Motorcycle sales are falling in 2010, as they have for each of the last three years. The company does not expect a turnaround anytime soon.

But despite that drought, Harley's profits are rising — soaring, in fact. Last week, Harley reported a $71 million profit in the second quarter, more than triple what it earned a year ago.

This seeming contradiction — falling sales and rising profits — is one reason the mood on Wall Street is so much more buoyant than in households, where pessimism runs deep and joblessness shows few signs of easing.

Many companies are focusing on cost-cutting to keep profits growing, but the benefits are mostly going to shareholders instead of the broader economy, as management conserves cash rather than bolstering hiring and production. Harley, for example, has announced plans to cut 1,400 to 1,600 more jobs by the end of next year. That is on top of 2,000 job cuts last year — more than a fifth of its work force.

As companies this month report earnings for the second quarter, news of healthy profits has helped the stock market — the Standard & Poor's 500-stock index is up 7 percent for July — but the source of those gains raises deep questions about the sustainability of the growth, as well as the fate of more than 14 million unemployed workers hoping to rejoin the work force as the economy recovers.

"Because of high unemployment, management is using its leverage to get more hours out of workers," said Robert C. Pozen, a senior lecturer at Harvard Business School and the former president of Fidelity Investments. "What's worrisome is that American business has gotten used to being a lot leaner, and it could take a while before they start hiring again."

And some of those businesses, including Harley-Davidson, are preparing for a future where they can prosper even if sales do not recover. Harley's goal is to permanently be in a position to generate strong profits on a lower revenue base.

In some ways, the ability to raise profits in the face of declining sales is a triumph of productivity that makes the United States more globally competitive. The problem is that companies are not investing those earnings, instead letting cash pile up to levels not reached in nearly half a century.

"As long as corporations are reinvesting, the economy can grow," said Ethan Harris, chief economist at Bank of America Merrill Lynch. "But if they're taking those profits and saving them, rather than buying new equipment, it hurts overall growth. The longer this goes on, the more you worry about income being diverted to a sector that's not spending."

"There's no question that there is an income shift going on in the economy," Mr. Harris added. "Companies are squeezing their labor costs to build profits."

The trend is hardly limited to Harley. Giants like General Electric and JPMorgan Chase, as well as smaller companies like Hasbro, the toymaker, all improved their bottom lines despite slowing sales in the second quarter. Among the S.& P. 500 companies that have reported second-quarter results, more than one in 10 had higher profits on lower sales, nearly twice the number in a typical quarter before the recession, according to Thomson Reuters.

"Whole industries are operating at new levels of profitability," said David J. Kostin, chief United States equity strategist at Goldman Sachs. "In the downturn, companies managed to maintain higher profit margins than ever before."

Profit margins — the percentage of revenue left over after expenses — crumble in most recessions, as overall sales fall but fixed costs like infrastructure, commodities and rent remain the same. In 2002, during the recession that followed the bursting of the technology bubble in addition to the Sept. 11 attacks, margins sank to 4.7 percent. Although the most recent downturn was far more severe, profit margins bottomed out at 5.9 percent in 2009 and quickly rebounded. By next year, analysts expect margins to hit 8.9 percent, a record high.

The difference this time is that companies wrung more savings out of their work forces, said Neal Soss, chief economist for Credit Suisse in New York. In fact, while wages and salaries have barely budged from recession lows, profits have staged a vigorous recovery, jumping 40 percent between late 2008 and the first quarter of 2010.

Harley-Davidson's profit gain last quarter was helped by a turnaround in its financing unit, as well as more efficient production, but the company is still cutting.

Harley has warned union employees at its Milwaukee factory that it would move production elsewhere in the United States if they did not agree to more flexible work rules and tens of millions in cost-saving measures.

Even if sales do improve, a surge in hiring is unlikely.

"The last thing we're worried about is when are we going to have to add more capacity, because what we're really doing is reconfiguring our entire operational system for greater flexibility," Keith Wandell, the company's chief executive, said on a conference call with analysts last week.

Harley's evolution is part of longer-term shift in American manufacturing, said Rod Lache, an analyst with Deutsche Bank.

At Ford, revenue in its North American operations is down by $20 billion since 2005, but instead of a loss like it had that year, the unit is expected to earn more than $5 billion in 2010. In large part, that is because Ford has shrunk its North American work force by nearly 50 percent over the last five years.

"These companies have cracked the code of a successful industrial turnaround," Mr. Lache said. "They're shrinking the business to a size that's defendable, and growing off that lower base."

To be sure, sales are rising for many companies, albeit at a much slower pace than the increase in profits. Among the 175 companies in the S.& P. 500 that have reported earnings for the second quarter, revenues rose 6.9 percent on average while profits jumped 42.3 percent, according to Thomson Reuters.

Still, even at corporations where both the top and bottom lines are expanding, the focus remains on keeping profits high, not rebuilding work forces decimated by the recession.

When Alcoa reported a turnaround this month in profits and a 22 percent jump in revenue, its chief financial officer, Charles D. McLane Jr., assured investors that it was not eager to recall the 37,000 workers let go since late 2008. "We have a tight focus on spending as market activity increases, operating more effectively and minimizing rehires where possible," he said. "We're not only holding headcount levels, but are also driving restructuring this quarter that will result in further reductions."

Michael E. Belwood, a spokesman for Alcoa, said more than 17,500 of the former workers were employed at units Alcoa has since sold, but added that the company "had to be resized to match the realities of the recession."

"We're keeping a close eye on costs because there is still uncertainty about the stability of this recovery," he said.

21 Things You Should Never Buy New

[original URL: http://finance.yahoo.com/news/21-Things-You-Should-Never-usnews-2356162080.html?x=0]

Wise Bread, On Monday June 28, 2010, 10:24 am EDT
 

If you're looking to get the most value for your dollar, it would do your wallet good to check out secondhand options. Many used goods still have plenty of life left in them even years after the original purchase, and they're usually resold at a fraction of the retail price, to boot. Here's a list of 21 things that make for a better deal when you buy them used.

1. DVDs and CDs: Used DVDs and CDs will play like new if they were well taken care of. Even if you wind up with a scratched disc and you don't want to bother with a return, there are ways to remove the scratches and make the DVD or CD playable again.

2. Books: You can buy used books at significant discounts from online sellers and brick-and-mortar used book stores. The condition of the books may vary, but they usually range from good to like-new. And of course, check out your local library for free reading material.

3. Video Games: Kids get tired of video games rather quickly. You can easily find used video games from online sellers at sites like Amazon and eBay a few months after the release date. Most video game store outlets will feature a used game shelf, as well. And if you're not the patient type, you can rent or borrow from a friend first to see if it's worth the purchase.

4. Special Occasion and Holiday Clothing: Sometimes you'll need to buy formal clothing for special occasions, such as weddings or prom. Most people will take good care of formal clothing but will only wear it once or twice. Their closet castouts are your savings: Thrift stores, yard sales, online sellers and even some dress shops offer fantastic buys on used formalwear.

5. Jewelry: Depreciation hits hard when you try to sell used jewelry, but as a buyer you can take advantage of the markdown to save a bundle. This is especially true for diamonds, which has ridiculously low resale value. Check out estate sales and reputable pawn shops to find great deals on unique pieces. Even if you decide to resell the jewelry later, the depreciation won't hurt as much.

6. Ikea Furniture: Why bother assembling your own when you can pick it up for free (or nearly free) on Craigslist and Freecycle? Summer is the best time to hunt for Ikea furniture--that's when college students are changing apartments and tossing out their goodies.

7. Games and Toys: How long do games and toys remain your child's favorite before they're left forgotten under the bed or in the closet? You can find used children's toys in great condition at moving sales or on Craigslist, or you can ask your neighbors, friends, and family to trade used toys. Just make sure to give them a good wash before letting junior play.

8. Maternity and Baby Clothes: Compared to everyday outfits that you can wear any time, maternity clothes don't get much wear outside the few months of pregnancy when they fit. The same goes for baby clothes that are quickly outgrown. You'll save a small fortune by purchasing gently used maternity clothes and baby clothes at yard sales and thrift stores. Like children's games and toys, friends and family may have baby or maternity clothing that they'll be happy to let you take off their hands.

[See 20 Things You Should Never Buy Used.]

9. Musical Instruments: Purchasing new musical instruments for a beginner musician is rarely a good idea. (Are you ready to pay $60 an hour for piano lessons?) For your little dear who wants to learn to play an instrument, you should see how long his or her interest lasts by acquiring a rented or used instrument to practice with first. Unless you're a professional musician or your junior prodigy is seriously committed to music, a brand new instrument may not be the best investment.

10. Pets: If you buy a puppy (or kitty) from a professional breeder or a pet store outlet, it can set you back anywhere from a few hundred dollars to several thousand dollars. On top of this, you'll need to anticipate additional fees and vet bills, too. Instead, adopt a pre-owned pet from your local animal shelter and get a new family member, fees, and vaccines at a substantially lower cost.

11. Home Accent: Pieces Home decorating pieces and artwork are rarely handled on a day-to-day basis, so they're generally still in good condition even after being resold multiple times. If you like the worn-out look of some decor pieces, you can be sure you didn't pay extra for something that comes naturally with time. And don't forget, for most of us, discovering a true gem at a garage sale is 90% of the fun!

12. Craft Supplies: If you're into crafting, you probably have a variety of different supplies left over from prior projects. If you require some additional supplies for your upcoming project, then you can join a craft swap where you'll find other crafty people to trade supplies with. If you have leftovers, be sure to donate them to your local schools.

13. Houses: You're typically able to get better and more features for your dollar when you purchase an older home rather than building new. Older houses were often constructed on bigger corner lots, and you also get architectural variety in your neighborhood if the houses were built or remodeled in different eras.

14. Office Furniture: Good office furniture is built to withstand heavy use and handling. Really solid pieces will last a lifetime, long after they're resold the first or second time. A great used desk or file cabinet will work as well as (or better than) a new one, but for a fraction of the cost. With the recession shutting down so many businesses, you can easily find lots of great office furniture deals.

15. Cars: You've probably heard this before: Cars depreciate the second you drive them off of the dealership's lot. In buying a used car, you save money on both the initial cost and the insurance. It also helps to know a trusty mechanic who can check it over first. This way, you'll be aware of any potential problems before you make the purchase.

16. Hand Tools: Simple tools with few moving parts, like hammers, hoes and wrenches, will keep for decades so long as they are well-made to begin with and are well-maintained. These are fairly easy to find at neighborhood yard or garage sales. If you don't need to use hand tools very often, an even better deal is to rent a set of tools or borrow them from a friend.

17. Sports Equipment: Most people buy sports equipment planning to use it until it drops, but this rarely happens. So when sports equipment ends up on the resale market, they tend to still be in excellent condition. Look into buying used sporting gear through Craigslist and at yard sales or sports equipment stores.

18. Consumer Electronics: I know most folks like shiny new toys, but refurbished electronic goods are a much sweeter deal. Consumer electronics are returned to the manufacturer for different reasons, but generally, they'll be inspected for damaged parts, fixed, tested, then resold at a lower price. Just make sure you get a good warranty along with your purchase.

19. Gardening Supplies: This is an easy way for you to save money, and all you need to do is be observant. Take a look outdoors and you'll likely find such gardening supplies as mulch, wood, and even stones for free or vastly reduced prices. Used garden equipment and tools are also common goods at yard sales.

20. Timeshares: Buying timeshares isn't for everyone, but if you decide that it suits your lifestyle, purchasing the property as a resale would be a better deal than buying it brand new: on average, you'll save 67 percent on the price for a comparable new timeshare. If you're new to timeshare ownership, give it a test run first by renting short term.

21. Recreational Items: It's fairly easy to find high ticket recreational items like campers, boats, and jet skis being resold. Oftentimes, they're barely used at all. As long as they're in safe, working condition, they'll make for a better value when purchased used than new.

Lynn Truong is the co-founder and Deals Editor of Wise Bread, a blog dedicated to helping readers live large on a small budget. Wise Bread's book, 10,001 Ways to Live Large on a Small Budget, debuted as the #1 Money Management book on Amazon.com.

How to Plan For a Double-Dip Recession

[adopted from http://finance.yahoo.com/news/How-to-Plan-For-a-DoubleDip-usnews-2055778412.html?x=0]

Rick Newman, On Friday June 11, 2010, 3:13 pm EDT

The insurance company Aflac didn't lose money during the recession, and it managed to pare costs without any layoffs. But it did institute a hiring freeze, which could stay in effect until the economy looks a lot stronger than it does right now. Many of Aflac's customers are small businesses like construction firms and car dealerships, and until they see a big pickup in business and start hiring themselves, Aflac's own sales won't increase enough to justify more hiring. "For us to see a pickup in new sales, somebody else needs to start it first," says Aflac CEO Dan Amos. "Jobs are going to be very slow in coming back."

[Slide Show: 11 Ways to Prepare for a Double-Dip Recession.]

In the aftermath of the Great Recession, that seems to be the whole problem: Everybody's waiting for somebody else to kick-start a robust recovery. Consumers typically get the ball rolling as they boost spending on homes, cars, appliances, and other purchases that they put off during the downturn. But millions of consumers remain out of work or dogged by too much debt. Companies would start hiring again if they felt economic activity was heating up, but CEOs like Amos have their doubts. The weak hiring then creates a circular effect, reinforcing consumers' reluctance to spend.

If consumers and businesses don't get traction soon, there could even be another recession. The dreaded "double-dip" scenario seems unlikely: Moody's Economy.com, for example, says there's just a 23 percent chance that the U.S. economy will be in a recession six months from now. But other forecasts are gloomier, and there's plenty of economic trouble to worry about. Europe seems much more prone to a double-dip, thanks to debt problems in Greece, Spain, Italy, and other countries, and any pain there could hurt here, too. In the United States, meanwhile, the housing bust refuses to end, government stimulus spending will soon peter out, and a mushrooming federal debt is spooking investors. If the American economy is ready to stand on its own, it's sure taking its time getting up off the floor.

It would probably take a major financial shock--like a debt default in one or more European countries--to trigger a double-dip, which would be characterized by a pullback in bank lending (again), fresh corporate layoffs, panicky stock markets, and plunging consumer confidence. There's not much ordinary consumers can do to prevent that, but they can take steps to safeguard their finances and improve their options if the economy gets worse instead of better. Here are 11 ways to prepare for a double-dip:

Save more. It might sound obvious, yet Americans aren't doing it. During the worst days of the recession, Americans boosted their savings to about 5 percent of their disposable income, as they built (or rebuilt) nest eggs and rainy-day funds. But the savings rate has now fallen to 3.4 percent, and that's not high enough. Economists believe the savings rate needs to be somewhere between 6 and 10 percent, for several years, for the nation to rebuild all the wealth lost in the housing and stock market busts. That might sound high, but the historical average after World War II was about 12 percent. Few households today can match that.

[See 10 companies back from the brink.]

Make backup plans. Yeah, it's tiresome to keep asking what could go wrong. But don't assume that just because the recession is technically over, you're out of the woods. Employers still might be inclined to cut pay, reduce hours, and trim their staffs, and some companies remain at risk of going belly up. So make contingency plans for what you would do if you lost 20 percent of your income, or 50 percent. What would you give up? How would you cut expenses? Are there any drastic changes you'd be able to make to get by on a lot less?

Stay liquid. Your rainy-day fund won't do much good if you can't tap into it, or if you'll lose money by being forced to sell stocks or other investments. With interest rates on the safest investments extremely low, it's tempting to invest cash someplace where it will earn a higher return. But make sure you retain a cushion in case something goes wrong.

Get smarter. Once employers do start to hire again, they're going to be extremely selective since they've got a huge pool to choose from. The best way to distinguish yourself is through education and training that's superior to those you're competing against for jobs. Additional degrees, courses, and training certificates are one obvious differentiator, but you don't need to spend a fortune to gain an edge. Employers will also be impressed if you can grasp technology that befuddles others or show deep knowledge of the issues facing your industry. Just showing up and asking for a job won't cut it any more, especially if the economy takes another downward turn.

[See 7 new rules for getting ahead.]

Start something on the side. You might prefer to relax in front of the TV at night, but that's not much of a backup plan. Instead, you might do freelance or consulting work, start an eBay business, or build a Web site showcasing your skills and accomplishments. That way, if you unexpectedly lose your day job, you'll have a little something to fall back on. You might even earn some extra income or make connections that open new doors. By the way, insisting that you're not the entrepreneurial type is no longer an excuse: A huge range of services on the Web, many of them free, make it easier than ever to set up shop on your own.

Wait. You might be dying to replace your aging car or upgrade to a more comfortable home. But put it off a little longer if you can. Money spent on a home or car is hard to tap into if you suddenly need it, and higher monthly payments could become a noose on your finances if money gets tight. This might require unusual discipline since it's a great time to buy a home, car, or other big-ticket item. Interest rates on loans are near historic lows, and with buyers scarce, prices are down. The good news is that a weak economy will probably depress prices for a while. Interest rates are harder to predict, but many economists now expect the Federal Reserve to wait until mid-2011 to raise its own short-term rates, which often reflect the rates on consumer loans. So there's a good chance it will still be a buyer's market a year from now--when the outlook for the economy might be clearer.

[See 10 new things we can't live without.]

Resist the lure of cheap energy. Oil prices have been falling lately, along with the price of gasoline, heating fuel, and other types of energy. But don't get used to it. Energy prices are depressed largely because the global economy is weak, but there's a good chance they'll go back up whenever the economy strengthens and demand for energy increases. So if you do buy a new car, home, or anything else that consumes energy, factor in fuel prices closer to 2008 levels--when gas hit $4 a gallon--than today's prices.

Postpone retirement. You might be able to retire on schedule, but if you're banking on the current value of your home or investment portfolio, run the numbers and ask if you could still afford retirement if the value of your assets fell by 20 percent or so. That probably won't happen, but working another few years and adding to your nest egg can't hurt. Take consolation in the fact that many of your fellow Americans will end up doing the same thing--partly because they can't afford to retire, and partly because official retirement ages are likely to go up.

Downsize. If you're planning any big changes, think small. If you have to move for a job, for instance, you might be able to move into a new home with one less bedroom or a smaller kitchen than you're used to, while lowering your mortgage payment and energy usage. Buy a four-cylinder car instead of a six-cylinder; your 0-to-60 time doesn't matter as much as it used to. If you run your own business, ask your landlord for a rent reduction, look for cheaper space, or see if it's possible to set up your office in the basement of your home. Space is cheap for the moment. Take advantage of it.

[See what Washington needs to learn from Greece.]

Stop speculating. If you guessed right and put money into the stock market during the low points of 2009, congratulations: You caught an epic wave that led stocks up by more than 80 percent between March 2009 and April 2010. But that rocket ride was based on the expectation that a recovery was coming and that stocks had been heavily oversold, assumptions that are suspect today. It's impossible to predict whether stocks will go up or down, but it does seem clear that the conditions that produced a bull market a year ago no longer exist. And those nagging debt problems in Europe could trigger a panic with little warning. So if you're playing the market today, be prepared to lose what you gamble.

Don't count on the government. Washington rode to the rescue in 2008 and 2009, with bailouts, stimulus spending, and vast economic subsidies that kept the recession from being a lot worse. But there's a limit to the levers Washington can pull, especially as the federal debt mushrooms and legislators get nervous about deficit spending. And many strapped state and local governments are now being forced to cut services and raise taxes. That means there will be a lot less help from the government to jolt a weak economy in the future, which could affect anybody who's gotten tax breaks, extended unemployment insurance, a stimulus-supported job, or other government aid. Sooner or later, the U.S. economy needs to function without a government crutch, and that moment could arrive sooner than we want it to. So get used to it: You're on your own.

Happy Birthdays 2010

= This post will be amended in rolling fashion =

Month of Jan ?

Feb 13 - Haur ?

Mar 12 - Sheen

Mar 29 - Huay

Apr 5 - Nai Nai (grandmother)

to be added:

Oct 5 - Wife

Dec 27 - Shuen

The New Rules of Remodeling

adopted from Yahoo Finance

original link: The New Rules of Remodeling

by M.P. Mcqueen

Tuesday, May 4, 2010

provided by

THE WALLSTREET JOURNAL

You may have noticed the lines at home-improvement stores getting longer or heard the whirring of buzz saws in your neighborhood. After years of economic recession and housing-market malaise, people are starting to fix up their homes again.

According to an April 15 report from the Joint Center for Housing Studies at Harvard University, annual spending on remodeling is expected to accelerate this year, with nearly 5% growth over 2009. "This year could produce the first annual spending increase for the industry since 2006," the peak of the housing boom, says center director Nicolas P. Retsinas.

But the forces driving today's action couldn't be more different from those during the boom. Back then, people wanted to renovate their places so that they could trade up to bigger homes, or because their home equity was soaring and they wanted to reinvest some of the spoils.

Now, the opposite is happening: Many people who bought during the boom years are accepting the reality that they won't soon be swapping up for a sybaritic spread. Their mortgages may remain above water, but after years of falling home prices, their equity is so low that the transaction costs of buying a new house would leave little for a down payment.

In short, they are stuck.

"People have seen their down payments kind of wiped out," says Harvard economist Jeremy Stein. "They are locked into their house. They can't really move, even if they thought the other house was cheap and a good deal."

So these people are making their homes more comfortable for a longer-than-expected stay. Setting aside old calculations of how much a particular improvement will add to resale value, they are making smaller tweaks that can make a big difference in livability. You might call it "psychological return on investment."

Nowadays, say real-estate agents and contractors, smaller projects like updating kitchens and baths and humble attic-bedroom conversions are more popular, while two-story master suites and $100,000 kitchen blowouts are decidedly out of fashion. Hidden improvements like insulation also are on the rise, as people realize they won't be able to pass on their drafts, leaks and other problems to the next guy. Tax credits that expire in 2010 are enticing people to make energy improvements, too.

One of the most cost-effective improvements, say contractors, is removing a wall to create an open kitchen-dining area. The project "makes the kitchen feel bigger and the kitchen and dining room more usable," says Sarah Susanka, an architect and author of "The Not So Big House" book series. "It's such a simple thing to do." It can cost as little as a couple of thousand dollars, according to David Merrick, a home remodeler in Kensington, Md., but can run much higher if plumbing and electrical work are involved.

A surprising number of people fall into the category of being above water on their mortgage but anchored to their property. According to First American Core Logic, at least 24.5 million borrowers in the U.S. have home equity of less than 25%, and of those, 13.2 million are above water. Considering the 9% in commissions and fees that typically come with buying and selling a house, as well as the typical 20% down payment on the new one, it is easy to see why people aren't house-hopping like before.

This applies even to affluent professionals. Paul Sorbera, an executive recruiter in Greenwich, Conn., is seeing it firsthand among his clients. He says many financial-services executives "bought $2 million homes in the good times and have $1.3 million houses now because of the price decline. They have some money in the bank and can afford their current living standard, but moving is very impractical for them."

Economists, whose models often assume the rationality of hypothetical consumers, say remodeling makes sense for such people. "If they don't have a lot of equity in their houses and can't move, they should have a propensity to improve rather than move," says Richard K. Green, director of the University of Southern California's Lusk Center for Real Estate. "When you renovate, you save a lot of transaction costs."

Web sites such as Remodelormove.com offer calculators to help consumers make the decision.

Kate Anderson, 42 years old, of Sunnyvale, Calif., a technical writer and homemaker, and her husband, Scott, 43, a vice president at Hewlett-Packard (NYSE: HPQ, News), say they considered buying a larger place to accommodate their growing children, a daughter, 10, and son, 8. But they surmised that buying and selling now would be too expensive. "We didn't think it was worth the whole sale purchase expense … just to get a few extra square feet," Mrs. Anderson says.

Instead, they opted to fix up their 1950s-era tract home, worth an estimated $750,000. Most houses in their neighborhood with new kitchens and baths sell for up to $850,000, she says. While their home "is a little squished," they chose to "gradually improve it," she says.

In December, the Andersons remodeled their kitchen, putting in hardwood floors, cherry cabinets and stainless-steel appliances, ripping out a closet and expanding a doorway to improve the flow. They also installed new incandescent ceiling lights and under-cabinet fixtures, which Mrs. Anderson says she especially loves.

Because they made no major structural changes, they kept the cost to about $50,000, a bargain in the pricey Silicon Valley market. It wasn't easy to hew to that budget, though; the couple decided to ditch a garden window over the sink and self-closing drawers, which would have added several thousand dollars to the cost.

Even in the ever-grander suburbs outside Washington, people are thinking smaller. A few years ago, Mr. Merrick, the contractor, says, more people were doing two-story additions, and most people who remodeled kitchens made them larger. Now, "four of the last six kitchens I did, the footprint stayed exactly the same," he says.

Home-improvement retailers are seeing a clear trend toward smaller renovations. Craig Menear, executive vice president of merchandising at Home Depot (NYSE: HD, News), says there has been strength recently in projects involving simple décor updates such as ceramic tile, interior paint, faucets and bath fixtures. At Lowe's (NYSE: LOW, News), customers were drawn to products to update flooring, cabinetry and countertops during the last few months of 2009, the most recent period for which data are available, spokeswoman Maureen Rich says.

Part of the reason, of course, is money. With home prices slumping, there is less equity for homeowners to tap. An April 20 survey by American Express (NYSE: AXP, News), the first of its kind, found that 72% of affluent homeowners planned to make improvements to their houses in 2010. But they expected to spend an average of just $11,500. And most respondents planned to pay for their projects with cash; just 16% planned to use debt.

Banks also are making credit less available than they used to. Keith T. Gumbinger, vice president of HSH.com, a mortgage-data firm, says that before the housing bust, banks would often lend for projects based on the value of the house after completion of the project, but they are less likely to do so now because "there's no guarantee the improvement or the market will lead to price appreciation." The result: even affluent homeowners aren't able to borrow as much as they used to.

With little reason to expect huge price gains in the housing market in the next few years, some homeowners are thinking especially long-term. Diane Ausavich, a remodeling contractor in Milwaukee, says a pair of physicians, as part of a bathroom renovation, recently installed a barrier-free, walk-in shower and higher countertops in their three-story lakefront home built in the 1890s. They did it "so that as they get older they can wheel in and out with a wheelchair if they should have to," Ms. Ausavich says. The homeowners are in their mid-40s and, "being doctors, I'm sure they see the gamut," she says.

Likewise, Marge Kumaki, 57, a marketing and public-relations consultant who resides in Silver Spring, Md., says she and her husband decided to do some basic upgrades on the post-World War II split-level home they have owned for 21 years after their two children left the nest for good in 2007.

She says she would prefer to move to a new high-rise condominium in downtown Bethesda, but that they decided to stay and renovate because it is more cost-effective and they like where they live now. Last summer's severe thunderstorms, which flooded their finished basement and required repairs, spurred them to get started.

Ms. Kumaki says they are planning to spend in the low $30,000s to update the upstairs bathroom, kitchen and family room.

But the couple have decided to hold off on another dream. "I've always wanted an addition, since it is a split level and you can go up or down," she says. "I'd like another level on top, but that's the future."

The New Remodeling Rules

During the bubble, homeowners sought the biggest, splashiest home improvements to boost resale value. Now they're doing smaller projects that deliver a similar result for far less money.

Northern Lights

The Northern Lights are seen above the ash plume of Iceland's Eyjafjallajokull volcano in the evening April 22, 2010. – Reuters pic

Warships sent to rescue stranded travelers

Warships sent to rescue stranded travelers

By JENNIFER QUINN and JAMEY KEATEN, Associated Press Writer

LONDON – Britain sent Royal Navy warships on Monday to rescue those stranded across the Channel by the volcanic ash cloud and the aviation industry blasted European officials, claiming there was "no coordination and no leadership" in the crisis that shut down most European airports for a fifth day.

Eurocontrol, the air traffic agency in Brussels, said less than one-third of flights in Europe were taking off Monday — between 8,000 and 9,000 of the continent's 28,000 scheduled flights. Passengers in Asia who had slept on airport floors for days and were running out of money staged protests at airport counters.

Icelandic volcano still spewing ash

Ash cloud grounds flights

A huge ash cloud from an Icelandic volcano continues to cause the "greatest disruption to air travel since 9/11."

Happy Birthday to Elder Princess

Support Earth Hour on Mar 27 8:30pm