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Home remodeling is on the rise, so which projects should you tackle?

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According to the latest report from the National Association of the Remodeling Industry (NARI), more homeowners are planning to tackle renovation projects in the coming months. NARI predicts that over the next three months, homeowners will finally dive into projects they've postponed in the past.

NARI reports that both the number of bids and the conversion rate of bids to jobs has increased since last year. The National Association of Homebuilders (NAHB) reports that although remodeling activity fell slightly in the second quarter of 2012, future activity is projected to be steady.

"Remodelers have some backlog of jobs and along with higher quality leads, this is making them cautiously optimistic about the near future," said George Moore Jr., NAHB Remodelers Chairman and owner/president of Elm Grove, La.-based Moore-Built Construction & Restoration Inc., in a press release. "The positive outlook is constrained by continuing credit constraints and inaccurate appraisals that make customer financing difficult for big jobs like additions and whole house remodels."

Twenty-eight percent of homeowners intend to stay in their home up to five years longer than they originally planned. Despite incremental increases in parts of the country home prices remain depressed, and that's keeping many would-be sellers out of the market.

"People are aware that their home values may not be as high as they once were, yet that only affects those that are forced to sell," Kevin Anundson, NARI national secretary and president of Elm Grove, Wis.-based Owner Assisted Remodeling, said in a press release. "Many homeowners have made the decision to remain in their home and are choosing to make improvements and increase their comfort and long-term living accommodations. This thought process allows them to be much less concerned about returns on investment and resale values."

So how do you decide which project to tackle first?

If you're hoping to sell in the near future, take on the renovations with the best return on investment and leave the rest for later. But if you're like many homeowners and have settled in for the long haul, get to work on things that make your home more enjoyable for you to live in.

Create an outdoor kitchen. Nothing's more fun in the summer than a backyard cookout, and having a full outdoor kitchen makes it even better. You can go the easy route and purchase a table and cabinet to put next to the barbeque, or take it up a notch and build out a full kitchen. You don't need granite or stainless, but be sure to use materials that can stand up to the elements. Add a sink for washing food, hands and dishes to avoid tracking a mess inside.

Add an awning to your patio. Putting an awning or covering over your deck or patio space will immediately make it the most useful room in the house. "With this hot summer we've seen a lot of awnings, a lot of covered porches," Anundson said in an interview. It makes outdoor space functional in the rain, and keeps the hot afternoon sun from baking you and your guests.

Build a shed. Some homeowners associations have rules against them, but if yours isn't one, a shed is a great way to stay organized. You'll get clutter out of your home and garage so the space will be more useful, and many sheds today actually add a little flair to your yard. Stay traditional with unfinished wood, or put a modern twist on it by matching it to your home. Choose a color scheme that compliments your home's exterior, add decorative windows and paint the door a nice bright red to really make it pop.

Ultimately, the project you choose depends on your stage of life and financial circumstances. But if you're planning to stay in your house for the long haul, take on the projects that will make your current place your dream home.

Ilyce Glink is an award-winning, nationally syndicated real estate columnist, blogger and radio talk show host, and managing editor of the Equifax Finance Blog. Follow her on Twitter.

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