Will My Home Remodeling Project Pay Me Back?
Remodeling Magazine's latest Cost Versus Value Report 2010-2011 has been released and it revealed that the recent declines in housing are having substantial effects on the remodeling market.
Unfortunately for homeowners, there has been a downward trend since 2006 in the cost-to-value ratio, though now this pace has quickened, falling 3.8 percent in the last year. While homeowners were once able to make upgrades and additions to their homes and recoup this value during resale, these same updates now mean less return. An unstable jobs market has purse strings tightened and remodeling markets are feeling the squeeze.
The report revealed, however, the top 10 remodeling projects in the last year. Leading the way in cost versus value are exterior replacements, with garage doors and entry-doors at the head of the class.
According to the report, "Replacement projects have always performed better in resale value than other types of remodeling projects, partly because they are among the least expensive projects in our report, and partly because they are non-discretionary improvements that contribute to curb appeal, which is a strong subjective factor among home buyers." Curb appeal is your home's first impression. This is why another project topping the list is wood deck additions. Outdoor space still reigns supreme, with these additions tying for fourth with minor kitchen remodels.
Minor kitchen remodels carry a higher price tag, but can be a sure-fire way to seal the deal in high-end markets. Kitchens are what "most prospective buyers [consider] most important room in the home," the report says. "Minor kitchen remodel may at first appear to buck the trend -- at $21,695 nationally, it is the highest price among projects under $25,000. But this project represents a relatively inexpensive "face-lift"."
Cost is at the forefront of homeowners' minds. With the unemployment rate near 9 percent and debt talks still looming over Congress, Americans are watching their dollars. They are keeping remodeling jobs small and inexpensive. Also making the top ten are attic bedroom and basement remodels. These projects use existing space and are cost-conscious.
Remodeling Magazine says, "Many homeowners have scaled back their remodeling plans. In some cases this means the projects are smaller in square footage ... in other cases, the work may be performed in phases to spread the cost over a longer period of time. Also, homeowners nowadays are selecting a wider range of quality than has been the case in the past. When choosing fixtures and finishes, they are trading the savings on lower-priced items for the ability to afford higher-priced items they deem more essential or more desirable."
The top non-replacement projects reflect this mindset. These figures are a glance at the nation as whole though. There are still regions experiencing higher cost-to-value ratios, namely in the Pacific and Southern regions. The report notes, "A number of cities in this year's Report show cost recouped averages that are above 100% for some remodeling projects. In general, this indicates that, on average, those projects are worth more in resale value than the owner spent to construct them. This may seem impossible, particularly to homeowners in areas where property values are stalled or dropping, and it certainly is the exception to the rule. When it does occur, however, it is usually tied to a particularly hot real estate market or to specific projects that are in high demand."
Increased market confidence, higher employment rates, and more even home prices could all be contributing factors. When people are confident that the market is on the mend and will rebound, they are more likely to enter the market. Increased buyer demand is just what an ailing market needs.