The desire for a better life motivates most homeowners to remodel, yet adding value is just as important.
When people choose to remodel, it’s likely because they have envisioned a better version of their home that provides the family more options and a richer life. So it’s no surprise that a 2014 National Association of Homebuilders survey identified “desire for better and newer amenities” as the motivation behind most home improvement projects. At the same time, however, most homeowners also want to know how improvements will impact their home’s value. Fortunately, there’s an answer.
Remodeling Magazine’s annual “Cost vs. Value Report” publishes data on 27 popular projects in 100 markets nationwide. It includes real-world pricing estimates from professional remodelers, along with the average value each project will add to the home in each market. The March 2016 report shows homeowners recouping more value for their remodeling dollars than at any time since the 2008 housing crash.
“Research shows that when home prices rise, remodeling projects add more value,” says
That’s a big change from recent years, which saw returns on remodeling slump across the board. “This year’s report shows that an average 64% of a project’s investment dollars should get recouped if the home is sold within a year,” adds Craig Webb, the magazine’s editor-in-chief. “That’s up from 62% in 2015 and the second-highest return in eight years.”
Exterior upgrades offer the highest percentage returns. Adding manufactured stone veneer siding will increase home value by an average 93% of the installed cost, a midscale garage door replacement returns 91%, and a steel entry door replacement returns 91%. Larger projects add more dollar value to the home but have lower cost-to-value ratios, with major kitchen remodels returning an average of 65%. One reason is that what makes a good kitchen or bath depends on personal taste and budget. Another is that labor is a much higher percentage of the job cost. It’s far more complicated to renovate a kitchen than to replace a door.
For homeowners looking for improvements that will make the home more saleable, Cost vs. Value is an obvious first stop. But it’s also a useful resource for people intending to stay put. For one thing, the report gives average real-world costs for work done by professional remodelers—a needed reality check to popular television shows. “It helps the homeowner understand that the cost of a professionally managed project has little or nothing in common with projects that you see on HGTV that are finished in a weekend at bargain basement rates,” says Webb.
The point is that while return on remodeling probably won’t be a make-or-break factor for most people, it can be a useful addition to any homeowner’s decision toolbox, regardless of how long they plan to live in the home.