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February 21st, 2013

Home remodeling doesn’t exactly pay

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iStock_Blue PrintsHomeowners who want to remodel will find both joy and sorrow in the 2013 Cost vs. Value Report, recently published by Remodeling Magazine.

The joy comes from the report’s finding that remodeling projects overall could be expected to return a higher percentage of their cost at resale in 2013, reversing a six-year decline in the recovered value of such investments. Every project on the national list posted a higher return in 2012 than it did in the prior year. The sorrow is that while returns are higher than they were, they’re still far short of 100 percent.

The complete list included 22 mid-range projects, ranging from a $1,137 steel entry door replacement to a $152,470 second-story addition, and 13 upscale projects, ranging from a $2,720 garage door replacement to a $220,086 master suite addition.

Best return

In the mid-range category, the least costly project–that steel entry door replacement–posted the highest return at 85.6 percent of the cost.

Other mid-range projects that returned 70 percent or better were an attic bedroom, basement remodel, wood deck addition, garage door replacement, minor kitchen remodel, vinyl siding replacement and vinyl window replacement. The lowest-returning mid-range project was a home office remodel, which recouped just 43.6 percent.

In the upscale category, the highest-returning project was a fiber-cement siding replacement, which recaptured 79.3 percent. Other upscale projects that returned 60 percent or better were a garage door replacement, foam-backed vinyl siding replacement and vinyl window replacement. The lowest-returning upscale project was the master suite addition, which recouped just 52.1 percent.

Money-losers

And in those figures also lies the sorrow. That steel entry door replacement was the only project in the mid-range or upscale category that achieved at least an 80 percent cost recovery, nationally. Every other project returned only a 60.6 percent national average. That’s not much of an incentive, financially-speaking, for home improvements.

Replacement projects generally were a better investment than remodeling or room additions. Cost-and-value-recapture percentages varied widely on a regional basis.

Contractors agree with the positive outlook

Remodeling contractors have high expectations for 2013, according to a fourth-quarter 2012 survey by the National Association of the Remodeling Industry (NARI) in Des Plaines, Ill.

The survey found remodelers reported better business conditions, more inquires, more requests for bids, more conversions of bids into jobs and a higher value of total jobs compared with the prior quarter.

Tom O’Grady, chairman of the NARI strategic planning committee and president of O’Grady Builders, a remodeling company, in Drexel Hill, Pa., said in a statement that remodelers were anticipating major growth in their businesses.

“Many (remodelers are) saying that their clients are feeling more stable in their financial future and their employment situations; therefore, they are spending more freely on remodeling needs,” O’Grady said.

The 2013 Cost vs. Value Report is a snapshot of generic projects and shouldn’t be applied to individual homes. Instead, homeowners should get estimates from local remodelers and discuss home values with a local real estate professional. For more information on the Remodeling Magazine annual report, be sure to report the report’s methodology.

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4 Responses to “Home remodeling doesn’t exactly pay”

  1. Wood Grain Vinyl - Perfect for Architectural Uses Says: February 21st, 2013 at 1:44 pm

    [...] Home remodeling doesn’t exactly pay [...]

  2. Jason Says: February 25th, 2013 at 10:06 am

    I’m surprised to find garage door replacement and decks on the list. Replacing a garage door can cost less than the steel door and that includes having someone install it, but I’ve never considered it as an upgrade. And I’ve never heard a buyer say that a deck was a main consideration in buying a home, although I suppose that would flow into homeowners wanting a backyard they can use for entertaining and recreation.

  3. Philadelphia Granite Countertop Says: March 6th, 2013 at 6:26 pm

    The master bedroom remodel is practically the price of a small home. Sheesh.

  4. Joy Says: April 12th, 2013 at 10:37 pm

    It was good to know that some people would like to spend their penny for home remodeling? Can you please provide some energy efficiency tips in renovating?

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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