Homeowners instead choosing to renovate their homes in a soft real estate market

In fact, they had planned on doing that right about now.

But then the housing market tanked, and the couple knew selling the three-bedroom home on Dewey Drive made little financial sense.

"We've had the house appraised a couple of times, and we're just above what we bought it for - we're very fortunate," Gillian DuVall said. "But we knew we wouldn't be able to sell it for what we need to sell it for."

So the couple decided to renovate instead. Once their $40,000 home remodeling project is finished this summer, they'll be staying put for at least the next five years, she said.

"It's not like we're renovating and we're going to turn around and sell it," said DuVall, 34. "It's not that kind of market."

At one time, couples like the DuValls may have purchased a starter home in hopes of one day trading up to something bigger and better.

But with a real estate market that remains soft, that's not necessarily a good idea right now, say homeowners and real estate agents.

More county families are opting to renovate their existing homes rather than invest in new ones. They're upgrading kitchens, adding bedrooms and even adding on apartment units in hopes of transforming something old into something new - at least until the market improves.

About 24 percent of Maryland homeowners have underwater mortgages, meaning they owe more on their homes than they're worth, according to figures released this week by real estate tracking firm CoreLogic.

"I'm seeing appraisals kill a lot of deals right now," said Warren Prins, an Annapolis-based Realtor with Coldwell Banker. "So people are trying to adapt their homes."

But they better have the cash, he said, because home equity loans remain tight. And if you're underwater on your mortgage, forget it.

"Banks won't lend you any money," he said.

DuVall said she and her husband bought their home for around $460,000. Built in the early 1950s, it wasn't perfect - the master bedroom on the first floor had only one window and a sky light, and the kitchen was outdated.

The couple had twin boys nine months ago, and began to talk about moving.

"We knew we couldn't do it without renovating the kitchen," DuVall said. "And then it became like a domino effect."

Right now, most of the first floor of the home is under construction. Contractors are adding more storage, installing two more windows in the master bedroom and putting in hardwood floors, DuVall said.

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