Remodeling Magazine recently released its 2008 National Cost vs Value report that breaks down the costs of remodeling projects and measures the potential return to homeowners who undertake specific projects. On their website they go further and break down the report by region and even to city city metro areas, so below I have the data from the Boston area displayed.
What is interesting is that the small decline nationally (compared to 2007) of 3.86% in the average amount recouped for remodeling projects shows that money spent on remodeling is holding value more than the housing market overall (which is down closer to 12-15% by price depending on the measure used). I see this in practice just about every day. Buyers are more and more interested in newer, nicer homes and condos. They want move in condition with all the bells and whistles. If it's not in great condition, then a home needs to be priced at a discount to attract buyers. Definitely the HGTV effect. Most people (not you of course!) see it on TV and they have to have it - and will pay a premium for it. New cabinets, shiny granite, nice crown molding.....it all pays.
In case you are wondering, the costs for the projects listed below do seem a bit high to me - I'm sure you can do a number of these projects for less (in some cases, a lot less). That being said, as you can see, it typically does not make a worthwhile investment to undergo a major remodel just before selling your home except in rare circumstances. And no matter when you are planning a remodel, for resale or for your own use, I would advise getting the advice of professionals (contractors to get price estimates, and real estate professionals to get before and after home value estimates) to guage what your return would be. After all you are talking about a major financial decision that could affect the value of your home. Of course - I'd be happy to lend my expertise in the Boston area on that. Contact me if you wish.
I would also only use these numbers as a relative measure rather than expecting a particular return expected below. For example, using the data below, I would say that a wood window replacement is a better investment than a home office remodel, but I wouldn't expect to recoup exactly 85.7% on the window replacement every time. Every home is unique and circumstances vary. In some cases you could recoup less, some more - even more than the cost for some homes - for a positive return on investment.
Here's the info for Boston (for both midscale and upscale projects):
Where Remodeling Magazine got the numbers:
Cost data are generated by HomeTech Information Systems, a remodeling estimating software company in Bethesda, Md. HomeTech regularly collects current cost information from a nationwide network of remodeling contractors and suppliers, and employs an adjustment factor to account for regional pricing variations. Construction cost figures include labor, material, subtrades, and contractor overhead and profit.
For each project, the “resale value” data are aggregated from estimates provided by members of the National Association of Realtors. E-mail surveys containing project descriptions, construction costs, and median home price data for each city were sent to over 150,000 appraisers, sales agents, and brokers. More than 4,000 survey respondents used this information to estimate the value that the remodeling projects would add to the house at resale in the current market.
Respondents were instructed not to make judgments about the motivation of the homeowner in either the decision to undertake the remodeling project or to sell the house. The survey was in the field for approximately eight weeks in July and August of 2008.
