How much has that remodel actually added to the value of your home? As prices for remodel projects have leveled off in recent months due to the decline of the housing markets and economy, most home owners are more concerned about their recoup values from a previous remodel rather than how much their home value will increase.
During a rising housing market, home improvement projects often pay for themselves through an increase in the value of the home. But as home prices begin to fall, real estate experts begin to look at the job cost, what that job will add to the resale value of the home and how much of that cost can actually be recouped at the time of sale.
While many wait for the 2008/2009 Cost vs. Value Report, the 21st annually produced report by Remodeling Magazine in cooperation with Realtor Magazine, many already suspect the numbers will be grim.
As discussed in previous Cost/Value reports, in an actual real estate transaction, the ‘cost recouped’ for a given remodel project depends on a variety of factors. Those factors include the condition of the rest of the house, the value of similar homes nearby, and the rate of at which property values are changing in the surrounding areas. A home’s setting, whether it is urban, suburban, etc, also greatly affects value, as does the availability and cost of new and existing homes in the immediate vicinity.
In better years, replacement projects typically lead an increase in return to the home owner. The 2006 Cost/Value Report indicated that of the top 10 projects nationally measured by cost recouped at resale, seven were replacement projects such as home siding, window replacement and roof.
Today, however, many home owners looking to remodel are spending their dollars on aesthetics to increase the curb appeal, rather than the replacement projects so prevalent in better markets. While this may increase the chances of a quicker sell, reports indicate recoup values in both categories have fallen significantly in the last year alone.
As an example, take an upscale replacement project such as replacing a roof. According to the report, in 2007, that project would have cost over $33,000, adding over $21,000 to the resale value of the home, or over 65 percent of the cost recouped at the time of sale. Today, according to the preliminary numbers of the 2008/2009 report, the anticipated cost of the project is up to over $36,000, adding almost $23,000 to the resale price, or 63 percent of the total cost recouped.
Those looking to change the aesthetics of a kitchen in an upscale remodel may find similar declines in costs recouped as well. In 2007, that upscale project would have cost almost $110,000, adding a resale value of slightly over $81,000 or over 74 percent to the total cost recouped. Today, however, the project cost has increased to almost $111,000, but with a lesser increase in the resale value, adding only slightly more than $78,000 for a recoup of just above 70 percent.
The report does anticipate some increases in recoup costs, however, over last year. Where an upscale bathroom remodel is concerned, recoup costs are expected to increase over 2% from the previous year. Siding replacement and the addition of a composite deck also posted cost recoup increases over the previous year as well.
For a complete look at the anticipated 2008/2009 Cost vs. Value Report, go to http://www.remodeling.hw.net/2008/costvsvalue/national.aspx.