Altadena Real Estate

To Remodel, Or Not To Remodel?

Steve and I often meet with Sellers that ask us what types of remodeling projects will add the most “value” to their homes. While each property is different, and can thus benefit from different types of enhancements, we have long espoused the value of cost-effective changes that offer a lot of bang for not a lot of buck. A recent report released by the National Association of Realtors (“NAR”), attempts to quantify the value of a variety of home improvement projects:

According to the NAR, home prices have fallen by about 7% across the nation over the past year. The value of home remodeling has also declined, though at a slower rate, falling by 3.86% in the same time, according to the 2008 Cost vs. Value Report, a survey jointly issued by Remodeling Magazine and the NAR.

Though the return on a remodel investment may have declined, in the current housing market homeowners may feel they have little choice but to love the home they’re with. Plus, as NAR president Charles McMillan points out in a statement, “Because today’s buyers have much more to choose from in the way of inventory, any home for sale must make a positive first impression.”

Which remodels provide the highest returns upon resale? According to the NAR survey, fiber cement siding and wood deck additions top the list — recouping 86.7% and 81.8% of project costs, respectively. Adding wood deck and siding replacements produced returns of more than 80%, the report said. Mid-range vinyl siding recovered 80.7% of costs and foam-backed vinyl siding, 80.4%. Window replacements bring in 76% of costs (The survey doesn’t mention the not-so-minor additional benefit of saving energy costs with a better insulated home). A minor kitchen remodeling job can return 79.5% of costs, while a major one can return 76%. (Again the survey doesn’t get into the benefits of green remodels.)

For the second year in a row, home office remodels, sunroom additions and back-up power generators brought in the lowest returns — 54.4%, 56.6% and 57.1%, respectively.

In conducting the 2008 report, Hanley Wood, an information company covering housing and commercial construction, and the NAR’s Realtor magazine compared construction costs with resale values for 30 mid-range and upscale remodeling projects comprising additions, remodels and replacements in 79 markets in the U.S.

1 Comment so far
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Great information, Lisa. The homeowner definitely must focus on high-value-added projects that are appropriate to their market and neighborhood. Many seemingly desirable home upgrades will not return the value invested through enhanced sales price. Especially in today’s housing market, it’s absolutely critical that you spend your remodeling dollars wisely—especially if you are planning to sell soon after the remodel is complete. Importantly, do not overextend yourself financially, because it might take awhile to sell, even with the improvements.

Whether of not you plan to sell your house in the near term, resale value should always be a consideration whenever you are planning out a home improvement project.

Comment by Laura

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