Think Twice Before You Start that Home Improvement Project
Home prices aren't the only thing that has plummeted recently. So, too, has the value of home improvement projects, according to Remodeling magazine.
Overall, homeowners can expect to see just 63.8 percent of their remodeling dollars added to the value of their home, according the the magazine's annual Remodeling Cost vs. Value Report. That's down a whopping 26 percent from the peak return of 86.7 percent in 2005. It's also the fourth consecutive year that the return on remodeling has dropped.
"Three or four years ago, a $50,000 or $100,000 kitchen was a sensible investment," Kermit Baker, director of the Joint Center for Housing Studies at Harvard University, told Remodeling. "Housing prices were increasing 6 percent, 8 percent or 10 percent a year. So you were adding to the value and letting the equity build up."
Not anymore. The Joint Center predicts home improvement jobs will decline 9 percent and remodeling will drop 3.5 to 4.5 percent in 2010.
The remodeling projects that will get done during the coming year mirror the mood of the market - robust is no longer a must.
Instead of granite countertops and designer fixtures, homeowners have become more practical, opting for replacing the roof, installing energy efficient windows or making small cosmetic changes, such as a new entryway door.
Homeowners trying to sell their property are concentrating on changes to make their home stand out in a market with too much inventory and not enough buyers. Even these owners are focusing on less expensive projects that improve their home's curb appeal.
So what home improvement projects provide the most bang for the buck? According to the report, they include:
- Installing a steel entry door costs an average $1,172 and returns $1,470 in resale value. It's not only the least expensive project on the survey, it's the only one that returned more than its cost at 128.9 percent.
- Adding an attic bedroom remains one of the best return on investment projects, returning 83.1 percent of its cost.
- Finding the cost of adding interior space prohibitive, homeowners are looking outdoors. A wood deck costing $10,634, returns 80.6 percent - about 10 percent more than a more expensive composite product.
- Installing vinyl siding not only returns 79.9 percent of its cost, it also improves curb appeal for a reasonable price. The average project cost $10,607.
- A minor kitchen remodel priced at $21,411 will get the homeowner back $16,773 or 78.3 percent.
- Replacing worn out windows with energy-efficient wood or vinyl models also has a good return. The example projects cost about $11,000 and returned approximately 77 percent.