Depending on the project, the average return on investment (ROI) nationwide for remodeling projects ranges from as high as 107.7% to as low as 53.9%. That’s the word from REMODELING Magazine’s annual Cost vs. Value Report that compared costs for 29 of the most popular professional mid-range and upscale remodeling projects in U.S. markets and how much real estate professionals believe the investment will improve a home’s re-sale value.
Both recent and long-time trends continued. “Curb appeal” projects—changes to doors, windows, and siding—by and large generated higher returns on investment than work done inside the home. Meanwhile, projects that called for replacing something, like a door or window, scored higher among real estate pros than did remodels.
Putting loose-fill insulation in an attic is the only project that returns a higher value than its cost. It came in at 107.7%. Next up is the steel door replacement, a perennial high finisher, at 90.7%, followed by manufactured stone veneer at 89.4%.
The most expensive projects—the upscale bathroom remodel, upscale master suite, two-story addition, grand entrance, and family room—saw the biggest year-over-year percentage increases in value. Why? Because the real estate market continues to recover.
According to the National Association of Realtors, the median price of an existing home sold in September was $234,200, up 5.6% from a year before and the 55th consecutive month of year-over-year gains.
- ROI:Roughly 10% of all projects nationwide had a return of over 100% and every one of the projects had a payback over 100% in at least one market nationwide.
- Geography:Geography matters — both for cost and for value. In general, the hotter the market, the bigger the payback or ROI. One-third of the 99 markets checked nationwide lack a single project with over 100% return—this despite the fact that every one of the 29 projects has a 100% payback in at least one market nationwide, and about 10% of all 2,871 projects had a triple-digit ROI.
- Curb Appeal:The highest returns (74.9% on average) are for so-called “curb appeal” projects – work that can be seen from the street. These include projects like replacing garage doors or windows, installing manufactured stone veneer, or installing a new entrance door. Real estate experts point out that people’s opinion of a home’s value is often shaped before they walk through the front door and the 2017 Cost vs. Value report certainly backs that up.
- Kitchen and Bath:In line with the importance of curb appeal, the lowest ROI in all of the Cost vs. Value projects is a mid-range bathroom addition, with a payback of just 53.8%. Not a single kitchen or bath project ranked higher than 17th out of the 29 projects because kitchen and bath remodels require much more skill and labor. And because kitchens and baths are such personal spaces; where one might remodel in a French Provincial manner, the buyer might prefer an ultra-sleek, modern look.
- Replacement vs. Remodeling: When comparing replacement vs. remodeling work, projects that called for replacing something that’s old, worn out, or broken had an average cost-value ratio nationwide of 74 percent. That’s more than 10 points higher than for remodeling projects because prospective buyers will demand the current seller fix something that’s broken before selling the home. Not doing so can significantly impact the sales price, so doing the replacement work has a bigger payback.
- Big Dollar Projects:In general, the cheaper the project, the higher the payback. But what’s also true for 2017 is that the more expensive projects saw the biggest increases in value compared with our 2016 report due to the real estate market’s continual recovery. In general, when home prices go up, real estate professionals feel better about how much a project will increase a home’s value. When real estate gets more expensive, just about anything done to expand or improve an existing home will lead to a jump in the home’s value. When housing is down in the dumps, adding a new door or fixing up the bathroom won’t yield nearly as much.
- Style Trends – Outdoor Living and Universal Design:Style trends also matter, and it’s for that reason two new project categories were added to the 2017 Cost vs. Value collection. The first involves outdoor living, which calls for a backyard deck with a flagstone patio, grill, fire pit, lights, a pergola, and a big sliding glass door to connect inside and outside. ROI here was 58%.
The second new project addressed meeting the needs of aging and multi-family households. It called for a bathroom renovated according to universal design principles. Changes here included widening the doorway so it would be accessible by wheelchair, reinforcing the walls to support grab bars, installing a zero-threshold shower with fold-down seat, putting in a comfort-height toilet, and installing a sink with space for a person to sit at it. This project had a ROI of 68.4%. Excellent news and one to consider as you remodel a master bathroom.
Over the next few years, as mortgage rates increase, expect more people to choose to stay put in their current homes and renovate, giving further support to a stable forecast for the remodeling industry. The tight housing market is also driving remodeling activity across the country which continues to push up home prices, allowing more owners to tap home equity lines of credit to invest in updating their homes.
The Cost vs. Value report continues to set the standard – both for professionals and homeowners — as one of the most reliable sources online for information regarding the value of home renovations.