Thursday, January 13, 2011

Cost vs. Value Report - 2010-2011

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 or his website. His website also has a handy remodel or move calculator to help you with your decision.

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.

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