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ADD BATHROOM OR GARAGE TO RAISE VALUE

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When interest rates rise just about everything in the housing market slows: the number of new permits issued, housing starts, sales, employment and maybe even prices.

It is a very old and often sad story, and an almost totally predictable one. In every period of high or rising interest rates since World War II the housing markets have been among the first to show the impact.It could be happening again.

The Commerce Department reports that new-home sales fell in June to an annual rate of 591,000 units, the lowest in two years, from a May figure of 688,000. Housing starts were down, too. So were sales of existing homes.

That said, interest rates aren't everything. Home prices are affected by dozens of specific factors, some within the control of those who live in them, those who seek to sell them and those who still want to buy.

You can't do much about the first of these - for example, a permanent body of water within 300 feet. Either it's there or it isn't. But you can change some factors - for example, adding a third bathroom - and probably raise the price 17.5 percent.

The National Association of Home Builders makes that estimate from its own and Census Bureau data, as applied to a 1,900 square-foot house with three bedrooms, two baths, three other rooms, a basement and a garage.

Unlike the construction of a body of water, which would add 27.8 percent to the price of a house if it were possible to so change the landscape, an added bath is generally feasible and capable of raising the market value 17.5 percent.

Add a fireplace, says the NAHB, and you might expect to add 10.8 percent to the market value, or around $13,500 if you use as a base the median new-home price of about $125,000. (Caution: National medians seldom apply speci-fi-cal-ly.)

Other price-enhancing additions may be less likely to pay for themselves.

A 500-square-foot expansion of floor space might add 9.4 percent to the price, a room addition other than bath or bedroom might add 5.9 percent and a fourth bedroom could push up the selling price 5.2 percent.

In making any of these alterations, of course, the overall appearance has to improve. An amateur carpentry or plumbing job or an awkward extension may reveal not just itself but alert a critical eye to other defects.

What a house lacks has a similar impact on market value.

The lack of a second bathroom lowers the price 18.5 percent and the absence of a garage 14.6 percent. If there is no central air conditioning the price is likely to be lowered by 12.8 percent. No basement deducts 3.1 percent.

Clearly, any attempt to add a basement isn't likely to be cost-effective, but adding a garage, bath or central air might be, depending upon factors specific to the house and to costs in the geographical area.

Three other factors, all requiring community rather than individual effort, were found to lower market values. Abandoned buildings cut prices 30.7 percent, trash in the neighborhood 14.5 percent and bad roads nearby, 6.5 percent.

The NAHB's list stops there, but obviously there's more to it than that. Other studies, some by the NAHB, show that the quality of schools, houses of worship and the level of taxes have sizable impacts on market prices.

While all factors aren't within the control of individuals, some are, so it's worth remembering: Rising interest rates needn't ruin prices and plans. There's a lot you can do to offset them.