Remodeling Magazine, published by Hanley-Wood, LLC, Washington, D.C., has been publishing the "Cost vs. Value Report" annually for more than twenty years. The 2010-2011 version compiles information for 80 markets, same as last year on 35 home improvement projects included in the analysis by HomeTech Information Systems , which publishes estimating software for professional remodelers. This information is collected and compiled from their national network of remodeling contractors and suppliers. Adjustment factors are employed to account for regional pricing differences.
What do the latest numbers have to say? Continued downward home prices (nationwide) have brought the overall cost-to-value ratios down to their lowest levels in the last ten years. So, the best rule of thumb is to be pragmatic as lowered home values have moved remodelers to those projects which don't require, in most instances, large outlays of capital. Of the top five projects, only one (minor kitchen remodel), involves costs of more than $14,000.
The least expensive of the 35 projects, an entry door replacement, actually had the highest return on investment nationally at 102.1% and 112.1% in the Pacific region. Generally, the replacement projects like entry door and garage door (improves curb appeal), have a much higher percentage of cost recouped.
Higher cost estimates for projects coupled with lower resale prices have tipped the percentages to below 100% with one exception -- the previously mentioned entry door replacement (steel). The report's findings underscored the fact that the percentage of cost recouped on upscale additions and remodels were significantly lower than mid-range additions, remodels and replacements. As you might suspect, many upscale projects are not undertaken using an investment return mentality and so I recommend against them if the project(s) are contemplated for resale of a home.
If interested, check out the full national Cost vs. Value Report. A map on the site shows cost comparisons by region. You may click on the region to make the information more relevant to your needs and even peruse past reports. For instance, click for the Pacific region report.
Here are selected 2010-2011 remodel and replacement projects for the Pacific region along with its average percentage of cost recouped (last year's report values in parentheses):
* Bathroom addition - 63% (68%)
* Deck addition (wood) - 76% (91%)
* Family room addition - 71% (73%)
* Master Suite addition - 67% (72%)
* Bathroom remodel - 79% (77%) (Only one to have increased from 2009-2010 report)
* Home office remodel - 54% (56%)
* Major kitchen remodel - 77% (84%)
* Minor kitchen remodel - 84% (94%)(project I have advised my clients to consider)
* Roof replacement - 65% (68%) (recommended sometimes to improve curb appeal)
* Siding replacement (fiber cement) - 72% (92%)
* Windows replacement (vinyl) - 80% (88%) (project I have advised my clients to consider)
* Entry door (steel) 112% (not in last year's report) (recommended to improve curb appeal)
* Garage door 77% (not in last year's report) (recommended to improve curb appeal
Hope this information is of help to you as you decide on remodeling projects to either enhance the value of your home for immediate reselling or to enjoy the lifestyle benefits of the improvements and have no plans to sell. Please remember that not all remodeling projects will result in higher resale values. Many folks think that someone will want to pay $100,000 more for their remodeled home that costs them $50,000 to complete. Not too likely as it depends upon on the project, the neighborhood, the likely market conditions upon completion, and other factors. If you are considering remodeling for a sale or just want to see what projects may cost and understand the process, I recommend reading the book "Remodel or Move?" by Dan Fritschen available at Amazon.com.
If you want a professional opinion of how the market will react to your proposed project and as a way to save time, money and hassle, please contact me. I would provide you a market assessment of your contemplated remodeling project and if you want, a referral to a licensed trades-person who can provide free estimates or just to talk it over with as you firm up your plans, please let me know. I would do this whether or not you would be doing the project for resale as I work exclusively by referral so regularly provide referrals to my clients to help them maintain or improve their homes. By the way, these referrals are from the heart, not the wallet as the only thing I get for a referral of this type is the satisfaction that you will be well-cared for by a licensed professional.
Thanks for reading Tom McEvoy's blog! Post your comment here or send me an email through my website.
Wednesday, December 22, 2010
Wednesday, December 8, 2010
December Silicon Valley Real Estate Market Highlights
Here are the highlights of November transactions and market comments for Santa Clara County real estate and San Mateo County real estate. Your comments and questions are always welcome. If you see something in your neighborhood that you are curious about or have a question, please don't hesitate to share with us. If you have questions or a comment, please leave them here, or feel free to contact me through my website.
> Market Overview -- The last several months has seen a continual decrease in the amount of sales in both counties, an indicator of slowing markets and something we see each year as we enter the fall and holiday season. Closings of single family residences (SFR) in Santa Clara County jumped a bit from last month to 820 but was 8.8% lower than the same month a year ago. For San Mateo County, closings were 330, virtually the same level as November 2009. My analysis of the transactional information reveals:
* The supply of homes available for sale (inventory), which was increasing later in the year (far longer than in most years), has now reversed course and is following historical trends in both counties. As usual for this time of year, inventory tends to drift lower. I'm sure we'll again see a major drop-off at the end of the year as many listing agreements expire on 12/31 of each year. Ask me why this is an extremely poor strategy that will set sellers up to lose money. Still, the market overall remains more positive in Santa Clara County. However, inventory levels were 37% higher in Santa Clara County and 33% higher in San Mateo County than the same month a year ago.
* 40% of sellers in Santa Clara County get at least list price for their single family homes! In San Mateo County, the corresponding percentage is a bit over 34%. This is another indicator that the overall market remains stronger in Santa Clara County. Also, these indicators have drifted lower and underscore a slowing market in both counties -- usual though for this time of year.
* Days of Unsold Inventory (DUI) continues to move lower. If this trend continues, it could portend a market that is gaining strength and could point to more positive market conditions next year. We watch this important indicator closely. As we have discussed, DUI is conceptually the inverse of inventory turns ratio and represents a calculation using both supply and demand. A higher figure for DUI, then, means the market is becoming weaker. For November, Santa Clara County had a DUI of 70 for SFR's, 84 for condos/townhouses and 140 for multi-unit properties. San Mateo County had a DUI reading of 94 for SFR's, 122 for condos/townhouses and an even higher number of 487 for multi-unit properties. Once again, notice that all readings were lower, hence more positive, for Santa Clara County.
> Seller Markets? -- For Santa Clara County the hottest (seller) market areas are Milpitas, the area comprising the cities of Mountain View, Los Altos and Palo Alto, East Valley (SJ), Evergreen Valley (SJ), South San Jose. For San Mateo County, we see hot markets in Foster City and Redwood Shores. A seller's market has shorter time on the market, fewer number of homes available for sale, higher demand by buyers with a tendency to have multiple offers and sale prices generally exceeding list prices with a potential of price appreciation.
> Buyer's Markets? -- For Santa Clara County, we see buyer's markets in Saratoga, Willow Glen (SJ), Los Gatos/Monte Sereno, Almaden Valley (SJ). Saratoga is my current "Best Buy" area in the county. For San Mateo County, we see buyer's markets in Menlo Park, Atherton, Belmont, Burlingame, Redwood City and especially the San Mateo Coast cities. What makes a "buyers" market is the relationship of supply to demand -- simply put as higher supply and lower demand. The characteristics of a buyer's market is a longer time on the market, higher number of homes available for sale, lower demand by buyers which translates into a lower probability of multiple offers and a tendency for price stabilization or even price depreciation.
Where do I get "Seller's" and "Buyer's" market information? This is not an opinion or based on price levels but a calculation I make using the number of homes for sale (supply) and the number of sales (demand) in the prior month which results in days of unsold inventory (DUI).
> Median price situation has changed in Santa Clara County -- The median price for SFR's in Santa Clara County which has mainly remained flat to slightly nudging upwards for several months has turned down. It now stands at $590,000, versus $641,500, or an 8.0% decrease from last month and a decrease of 2.5% from the same month a year ago. The median price for condos/townhouses was $315,975, down 4.25% from $330,000, last month a 10.4% drop from last year. San Mateo County's median price for SFR's was $723,000, up from $675,000 last month but a decrease of 0.3% from the same month a year ago. The median price for San Mateo County condo/townhouses was $415,000 or 9.2% higher than the $380,000, last month and decreased 6.5% from last year. I continue to advise my clients NOT to use an entire county's median price level to decide whether to buy or sell or time the market. To formulate an effective strategy, I recommend the use of the supply-demand characteristics for the neighborhood under consideration.
> Buyers get going -- I've mentioned that buyers need to think about a time of year when there is historically less activity and a good time of the year to do that is when we approach and are in the holiday period of the year -- like NOW. We're seeing the inventory of available homes decrease and those homes remaining on the market, in all likelihood, have sellers that have a higher motivation to sell. In Santa Clara County currently there is a tendency for buyers to search for single family residences but there are better deals in condos/townhouses due to greater supply compared to demand in the $450,000 to $750,000 price range. Same goes for San Mateo County -- good deals are probable in all price ranges but the lowest price range ($450,000 and below).
Need help with understanding the market in your area? Give me a call or email me for a no-obligation consultation and research to arm you with market intelligence to help you make a better, more-informed decision.
Thanks for reading my blog. I'm Tom McEvoy, Realtor with RE/MAX Santa Clara Valley -- Let me know your comments, questions, observations you may have or any future topics you'd like me to address.
> Market Overview -- The last several months has seen a continual decrease in the amount of sales in both counties, an indicator of slowing markets and something we see each year as we enter the fall and holiday season. Closings of single family residences (SFR) in Santa Clara County jumped a bit from last month to 820 but was 8.8% lower than the same month a year ago. For San Mateo County, closings were 330, virtually the same level as November 2009. My analysis of the transactional information reveals:
* The supply of homes available for sale (inventory), which was increasing later in the year (far longer than in most years), has now reversed course and is following historical trends in both counties. As usual for this time of year, inventory tends to drift lower. I'm sure we'll again see a major drop-off at the end of the year as many listing agreements expire on 12/31 of each year. Ask me why this is an extremely poor strategy that will set sellers up to lose money. Still, the market overall remains more positive in Santa Clara County. However, inventory levels were 37% higher in Santa Clara County and 33% higher in San Mateo County than the same month a year ago.
* 40% of sellers in Santa Clara County get at least list price for their single family homes! In San Mateo County, the corresponding percentage is a bit over 34%. This is another indicator that the overall market remains stronger in Santa Clara County. Also, these indicators have drifted lower and underscore a slowing market in both counties -- usual though for this time of year.
* Days of Unsold Inventory (DUI) continues to move lower. If this trend continues, it could portend a market that is gaining strength and could point to more positive market conditions next year. We watch this important indicator closely. As we have discussed, DUI is conceptually the inverse of inventory turns ratio and represents a calculation using both supply and demand. A higher figure for DUI, then, means the market is becoming weaker. For November, Santa Clara County had a DUI of 70 for SFR's, 84 for condos/townhouses and 140 for multi-unit properties. San Mateo County had a DUI reading of 94 for SFR's, 122 for condos/townhouses and an even higher number of 487 for multi-unit properties. Once again, notice that all readings were lower, hence more positive, for Santa Clara County.
> Seller Markets? -- For Santa Clara County the hottest (seller) market areas are Milpitas, the area comprising the cities of Mountain View, Los Altos and Palo Alto, East Valley (SJ), Evergreen Valley (SJ), South San Jose. For San Mateo County, we see hot markets in Foster City and Redwood Shores. A seller's market has shorter time on the market, fewer number of homes available for sale, higher demand by buyers with a tendency to have multiple offers and sale prices generally exceeding list prices with a potential of price appreciation.
> Buyer's Markets? -- For Santa Clara County, we see buyer's markets in Saratoga, Willow Glen (SJ), Los Gatos/Monte Sereno, Almaden Valley (SJ). Saratoga is my current "Best Buy" area in the county. For San Mateo County, we see buyer's markets in Menlo Park, Atherton, Belmont, Burlingame, Redwood City and especially the San Mateo Coast cities. What makes a "buyers" market is the relationship of supply to demand -- simply put as higher supply and lower demand. The characteristics of a buyer's market is a longer time on the market, higher number of homes available for sale, lower demand by buyers which translates into a lower probability of multiple offers and a tendency for price stabilization or even price depreciation.
Where do I get "Seller's" and "Buyer's" market information? This is not an opinion or based on price levels but a calculation I make using the number of homes for sale (supply) and the number of sales (demand) in the prior month which results in days of unsold inventory (DUI).
> Median price situation has changed in Santa Clara County -- The median price for SFR's in Santa Clara County which has mainly remained flat to slightly nudging upwards for several months has turned down. It now stands at $590,000, versus $641,500, or an 8.0% decrease from last month and a decrease of 2.5% from the same month a year ago. The median price for condos/townhouses was $315,975, down 4.25% from $330,000, last month a 10.4% drop from last year. San Mateo County's median price for SFR's was $723,000, up from $675,000 last month but a decrease of 0.3% from the same month a year ago. The median price for San Mateo County condo/townhouses was $415,000 or 9.2% higher than the $380,000, last month and decreased 6.5% from last year. I continue to advise my clients NOT to use an entire county's median price level to decide whether to buy or sell or time the market. To formulate an effective strategy, I recommend the use of the supply-demand characteristics for the neighborhood under consideration.
> Buyers get going -- I've mentioned that buyers need to think about a time of year when there is historically less activity and a good time of the year to do that is when we approach and are in the holiday period of the year -- like NOW. We're seeing the inventory of available homes decrease and those homes remaining on the market, in all likelihood, have sellers that have a higher motivation to sell. In Santa Clara County currently there is a tendency for buyers to search for single family residences but there are better deals in condos/townhouses due to greater supply compared to demand in the $450,000 to $750,000 price range. Same goes for San Mateo County -- good deals are probable in all price ranges but the lowest price range ($450,000 and below).
Need help with understanding the market in your area? Give me a call or email me for a no-obligation consultation and research to arm you with market intelligence to help you make a better, more-informed decision.
Thanks for reading my blog. I'm Tom McEvoy, Realtor with RE/MAX Santa Clara Valley -- Let me know your comments, questions, observations you may have or any future topics you'd like me to address.
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