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NATIONAL ASSOCIATION OF REALTORS® statistics show that home prices have
fallen by an average of 7 percent nationally in the past year. But the value of
home owners’ investment in remodeling projects has declined only 3.86 percent
on average between 2007 and 2008.
At the height of the housing boom in 2005, home owners could expect to
recoup a national average of 86.7 percent on projects.
Remodeling remains hot in 10 cities, and some projects, home owners can
recover 100 percent of their costs. Higher rates of recovery were seen in both
strong real estate markets and weak ones. Many cities with the highest
rates of recovery were smaller—Jackson, Miss., and Billings, Mont., for
example—which may point to lower labor and materials costs that are easier to
recoup. The result is an average cost-recouped percentage that’s 14.8
percent higher than in the rest of the country.
Top 10 Project Paybacks
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—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.
1. Upscale fiber cement siding (86.7%)
2. Midrange wood deck (81.8%)
3. Midrange vinyl siding (80.7%)
4. Upscale foam-backed vinyl (80.4%)
5. Midrange minor kitchen remodel (79.5%)
6. Upscale vinyl window replacement (79.2%)
7. Midrange wood window replacement (77.7%)
8. Midrange vinyl window replacement (77.2%)
9. Upscale wood window replacement (76.5%
10. Midrange major kitchen remodel (76.0%)
The Specs
To help respondents determine the resale value of
improvements, the survey provided specifications for each project:
- Attic
Bedroom Remodel. Convert unfinished attic space
to a 15-by-15-foot bedroom and a 5-by-7-foot bathroom with shower. Include
a 15-foot shed dormer, four new windows, and closet space under the eaves.
Insulate and finish ceiling and walls. Carpet floor. Extend existing HVAC
to new space; provide electrical wiring and lighting to code. Retain
existing stairs, but add rail and baluster around stairwell.
- Minor
Kitchen Remodel. In a functional but dated
200-square-foot kitchen with 30 linear feet of cabinetry and countertops,
leave cabinet boxes in place but replace fronts with new raised-panel wood
doors and drawers, including new hardware. Replace wall oven and cooktop
with new energy-efficient models. Replace laminate countertops; install
mid-priced sink and faucet. Repaint trim, add wall covering, and remove
and replace resilient flooring.
- Basement
Remodel. Finish the lower level of a
house to create a 20-by-30-foot entertaining area with wet bar and a
5-by-8-foot full bathroom; construct 24 linear feet of finished partition
to enclose mechanical area. Walls and ceilings are painted drywall
throughout; exterior walls are insulated; painted trim throughout. Include
five six-panel factory-painted hardboard doors with passage locksets.
Electrical wiring to code. Main room> Include 15 recessed
ceiling light fixtures and three surface-mounted light fixtures, as well
as a snap-together laminate flooring system. Bathroom> Includes
standard white toilet, vanity with cultured marble top, resilient vinyl
flooring, two-piece fiberglass shower unit, a light/fan combination,
vanity light fixture, recessed medicine cabinet, towel and paper-holder
hardware. Bar area> Include 10 linear feet of raised-panel oak
cabinets with laminate countertops, stainless steel bar sink, single-lever
bar faucet, undercounter refrigerator, and vinyl floor tile.
- Upscale
Bathroom Remodel.
Expand an existing 35-square-foot bathroom to 100 square feet within
existing house footprint. Relocate all fixtures. Include 42-by-42-inch
shower with ceramic tile walls with accent strip, recessed shower caddy,
body-spray fixtures, and frameless glass enclosure. Include a customized
whirlpool tub, stone countertop with two sinks, two mirrored medicine
cabinets with lighting, a compartmentalized commode area with one-piece
toilet, and a humidistat-controlled exhaust fan. Use all color
fixtures. Use larger matching ceramic tiles on the floor, laid on the
diagonal with ceramic tile base molding. Add general and spot lighting
including waterproof shower fixture. Cabinetry includes a custom drawer
base and wall cabinets for a built-in look. Extend HVAC system and
include electric in-floor heating and heated towel bars.
Why Renovation Pays
Why are renovations holding their value better than home
prices today? "When housing slows down, people stay put and renovate their
house to make it more livable," says Paul Zuch, president of Capital
Improvements, a designing, building, and remodeling company in Dallas. And by
renovating before they sell, home owners get to enjoy the new space themselves,
not just make the home more appealing to buyers. "It just makes
sense," says Zuch.
Recent renovations also make buyers’ lives easier.
"Home owners who remodel their home are providing a service to future
buyers," says Eileen Nelis, a broker at Savvy and Co. in Charlotte, N.C.
"When buyers purchase, they don’t want to do all that painting and
remodeling, and they don’t want that price tag. They may be willing to make
improvements down the line, but when they purchase, they want to open the door
and have everything complete. It reduces their stress."
Making home improvements can also reduce sellers’ stress by
heading off that time-honored negotiating technique—pecking away at the sales price
by pointing out imperfections. "If sellers have done some improvements and
dressed up their property, the improvements will help sell it," says
Bernard Fallon, broker at Fallon Associates Realty in Rochester, N.Y. "If
sellers don’t want to improve their property, buyers will tick off the repairs
and try to take them off the price."
That doesn’t mean that every home owner should do every
renovation, even in a more stable real estate market. Take Tulsa, Okla., where
median home prices actually edged up slightly more than 2 percent in 2008,
according to NAR. REALTORS® in Tulsa reported that, of the 30 remodeling
projects surveyed, only 16 netted home owners at least 80 percent of the
cost.
"Not every neighborhood will support the additional
work," says Jim Hemphill, a sales associate at Coldwell Banker Select in
Tulsa, "but in older, more established neighborhoods, if you redo a
kitchen or bathroom or add a master bath or bedroom, you’ll get your money
out."
Despite the value, the weak economy is likely to slow seller
spending on remodeling, at least in the short term, predicts the most recent
Leading Indicator of Remodeling Activity computed by the Joint Center for
Housing Studies at Harvard University.
The LIRA for the third quarter of this year estimated that
owners’ spending on home improvements will decline at an annual rate of 12
percent by the second quarter of 2009, continuing a two-year downward trend.
Spending is unlikely to recover until the housing market turns around,
according to the Center.
Yet, despite declines in overall remodeling dollars spent
and a still shaky housing market, "people’s homes are still one of their
best, most solid investments," notes Zuch. "Even though the markets
have gone through some adjustments, it’s still smart to invest in your
home."
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Info provided by
G.M.
Filisko REALTOR® magazine December 3, 2009http://www.realtor.org/rmohome_and_design/articles/2008/0812_costvsvalue_2008