Cost versus Value for Home Improvement
Despite the drop in home values in many areas lately, remodeling projects are still a great way for owners to add value. Home owners want to know where they will get the most bang for the buck when it comes to home improvements.
NATIONAL ASSOCIATION OF REALTORS® statistics show that home prices have fallen by an average of 7 percent nationally in 2009. But the value of home owners’ investment in remodeling projects has declined only 3.86 percent on average between 2007 and 2008, according to Remodeling’s 2008–2009 Cost vs. Value Report.
Remodeling magazine produces the Cost vs. Value Report each year in cooperation with REALTOR® magazine. REALTORS® responding to a survey in midsummer said home owners could expect to recoup a national average of 67.3 percent of their investment in 30 different home improvement projects. At the height of the housing boom in 2005, home owners could expect to recoup a national average of 86.7 percent on projects.
Once again, exterior remodeling projects lead the way for recovery on dollars spent in this year’s Cost vs. Value survey. When you compare the national averages, replacement projects that boost curb appeal such as siding, windows, and decks give you the greatest chance of recouping your money. Inside, only kitchen remodels can compare, at least on a national level.
Top 10 Project Paybacks
- Upscale fiber cement siding (86.7%)
- Midrange wood deck (81.8%)
- Midrange vinyl siding (80.7%)
- Upscale foam-backed vinyl (80.4%)
- Midrange minor kitchen remodel (79.5%)
- Upscale vinyl window replacement (79.2%)
- Midrange wood window replacement (77.7%)
- Midrange vinyl window replacement (77.2%)
- Upscale wood window replacement (76.5%)
- Midrange major kitchen remodel (76.0%)
Why are renovations holding their value better than home prices today? When the real estate market hits a downturn, more people decide to stay put and renovate their house. By renovating before they sell, home owners get to enjoy the updates and make the home more appealing to buyers. Renovations can make selling your home easier. When buyers are looking at homes, most do not want to paint, update or remodel. And more importantly, they don’t want to pay for it. They may be willing to make improvements down the line, but when they purchase, they want to open the door and have everything complete.
Making home improvements can also reduce sellers’ stress by stopping the potential buyer from negotiating the sales price by pointing out needed updates. When sellers don’t improve their home, buyers will add up all the repairs and use them to try to get a lower price.
That doesn’t mean that every home owner should do every renovation, even in a more stable real estate market. Not every neighborhood will support the additional work, but in older, more established neighborhoods, if you redo a kitchen or bathroom or add a master bath or bedroom, you could get more money when you sell. Despite a decline in remodeling dollars spent and a shaky housing market, your home can still be a good investment.