Remodel or Replace?
The
2017 Cost vs. Value report by
Remodeling magazine documents the national and regional costs and ROI (return on investment) for 29 popular home improvement projects. Overall, these 29 improvements paid back 64.3 cents on the dollar in resale value. What that says to the homeowner is that spending money to sell a home requires research. The goal of improvements from a seller’s standpoint is to attract buyers and achieve top dollar on a listing. But finding the balance between updates and return isn’t that simple.
In a seller’s market, spending (significant amounts of) money on improvements for resale may not translate to added value. As the tide turns to a buyer’s market in the next year or so, agents will need to carefully track ROI numbers to advise sellers.
Those surveyed about the return on remodeling projects were licensed agents, so
Remodeling Editor-in-Chief Craig Webb says the report is a reflection of confidence in the industry:
“I think that this year’s Cost vs. Value report actually reflects the general optimism that both remodelers and Realtors have about the state of the housing economy. We are building more and more homes, slowly in this country, but that’s rising. Remodeling activity is as active as it’s ever been in history. And so, consequently, the prospects are good for everyone involved in the process: the consumer, the remodeler, the Realtor.”
Why the top 10 isn't accurate for everyone
National numbers don’t really mean anything to the individual homeowner. Improvements that pay off (or not) depend on the same three factors that affect home prices: location, location, location. Agents should drill down to regional or city numbers in this study to find more applicable ROI numbers. “There’s variation by projects and variations by the cities,” Webb explained. “Sometimes it’s labor and sometimes it’s the perception of Realtors.” That being said, there are some interesting national trends that may impact homeowners locally. Note that these projects are broken down into mid-range and upscale categories to account for building materials and finishes.
Subtle changes pay off
The #1 trend in this year's numbers is that the subtle changes make for the biggest return on investment.
Remodeling compared these minor improvements to painting with “greige” — the popular mix of gray and beige that’s a subtle but wildly popular color this year. The two highest percentage returns nationally came from low-ticket improvements under $2,000: attic insulation came in no. 1 at 107.7 percent, followed by entry door replacement (steel) at 90.7 percent.
Biggest Losers
Year over year, the trends show that mid-range and upscale additions (except decks) saw less than 62-percent returns overall. This doesn’t make one of these projects a “loser,” per se, if it makes life in your home better. Just don’t expect to make big money here.
There are two reasons to add on regardless of return. First, the homeowner simply needed more room well before they were prepared to sell. Second, the home was disproportionate to those around it (for example, a one-bath in a neighborhood full of two- and three-bath homes). The biggest low-return project was a $12,860 backup power generator at 54 percent ROI. (It seems there are few believers in the Zombie Apocalypse.) The second-runner-up loser is a $51,935 backyard patio at 54.9 percent ROI; the project includes 20×20 flagstone patio, sliding door, stone-veneer-surround outdoor kitchen, a gas-powered firepit, pergola and lighting. (Perhaps the lack of hot tub for that spend was the deciding factor.)
Best ROI by region
Regional patterns have remained the same year over year. The nation’s hottest market is the Pacific region, with overall returns at 78.2 percent and 10 projects with at least 90 percent ROI. Conversely, slow markets in the Midwest brought in the lowest overall returns at 54.9 percent and no paybacks over 80 cents on the dollar. “If you go to San Francisco, 21 of the 29 projects have a return over 100 percent,” Webb said. “But if you go to Indianapolis, or the entire states of Wisconsin, Michigan, Iowa, Illinois, Nebraska and Kansas, there’s not a single project over 100 percent. However, all 29 projects returned over 100 percent in at least one region of the country.”
Read more at the source of this article from Inman:
http://www.inman.com/2017/02/07/remodel-replace-top-10-roi-opportunities-popular-home-improvement-projects/