Planning to renovate your kitchen, add a master suite, or undertake some other pricey home improvements? Watch out—not all of these home improvements pay off like they did in the past, according to Remodeling magazine’s latest Cost vs. Value Report.
For this much-referenced annual report, now in its 31st year, researchers pinpointed the average return on investment, or ROI, of 20 popular home improvements by canvassing contractors nationwide on how much these upgrades cost to complete, then compared that with how much real estate agents estimated these upgrades and features would boost a home’s market price (in other words, their value).
The news isn’t so good for homeowners looking to upgrade and update on a massive scale: The report found that in 2018, Americans should expect to make back only about 56% of their cost of improvements. That’s down from 64% the previous two years. So what gives?
“This year, the most expensive projects didn’t have much of a gain,” says Craig Webb, editor of Remodeling and manager of the report. “I think it’s because real estate professionals think we’re getting close to a peak in market prices. So consequently, spending a lot of money does not automatically mean your house will just ride the escalator up and be worth a lot more.”
Current events could also play a role. New tax laws curtailing the deductibility of mortgage interest and local property taxes might be dampening real estate agents’ confidence that piling on the renovations will pay off. Plus, recent wildfires, mudslides, and other natural disasters have created what Webb calls “a freight train of extraordinary demand” on materials and labor that is bound to jack up renovation costs all round, leading to thinner margins on their ROI.
But it’s not all doom and gloom. As usual, this year’s report found that the ROI varied widely by project. The cost of a new garage door, for instance, essentially pays for itself, earning you a whopping 98.3% of your money back, making this the best value of the whole bunch. And the worst? If you install a back patio, it may improve your resale value only enough to recoup 48% of your cost. (Wood decks are a better choice for ROI.)
Check the chart below for a full rundown of the top home improvements, including their average cost, their value at resale, and the percentage of your cost you’ll recoup. And if you’re looking for some general pointers on improving your home value, here’s one: If you’re going to shell out money, do it where everyone will notice—on the front of your house.
“Curb appeal projects tend to have high paybacks than inside-the-house projects,” Webb continues. “Any real estate professional will tell you curb appeal matters a lot, and these numbers prove it.”
This explains why garage doors top this list, followed closely by manufactured stone veneer (which offers a 97% ROI) and wood decks (83%).
Your return on investment may be much higher than the charts show if you make smart upgrades and repairs. Potential buyers could be scared off by ugly tile countertops or a sagging deck, for example. If you do sell a house in need of repairs, you may be forced to make flagged improvements before closing anyway, at your expense. And if you have a sense of style, you can update the look and feel of a home—and increase your home equity—with just a few light fixtures and other home improvements.
You can increase your return on investment by shopping carefully for materials and doing some or all the work yourself. The less you spend building that deck, or refacing the kitchen cabinets instead of replacing them all, the more likely you may be to recoup your money.
While you’re watching project costs, make sure you shop around for the best deals on home improvement loans. Unless you can pay off the cost of your home improvement projects quickly, avoid using high-interest credit cards. You may be able to get a home improvement loan from your bank or credit union, or even a home equity loan, at a much lower interest rate.
Don’t forget that home improvement is not just about return on investment. Energy-efficient appliances, for example, can save you money between now and the time you sell your home. A bathroom remodel or new kitchen flooring may not dramatically change the amount of money you get for your home, but they can make living in your home much more pleasant in the meantime.
Another golden rule of home improvement? “It’s better to replace or repair than add and remodel,” says Webb.
In other words, homeowners should go ahead and fix that frayed vinyl siding or replace the roof before bathroom remodeling or overhauling the kitchen. Mostly, keep in mind that if your tastes are, ahem, unique, that could lead to trouble if you’re expecting home buyers to swoon over the same things.
“You may spend gobs of money on what you think is the perfect kitchen remodel,” Webb says. “But if your idea is to have something from the 1970s with avocado ovens, the next person could walk in and say, ‘That’s ugly. I don’t care that you spent $75,000 on that—let’s tear it out and replace it anyway.'”
Intrigued? Here’s more info on how much it costs to renovate a house.
