Return on Remodeling Dollars

Results from the 19th annual Cost vs. Value Report, produced by Remodeling Magazine, suggest a narrow difference in the top-five remodeling projects based on percent of cost recouped. According to the national averages, 5th place went to midrange bathroom remodels, but they only fell 3.1-percent behind upscale siding replacement projects that used fiber-cement products and came in 1st.

Specpan, an Indianapolis- based market research company, created and hosted a web-based survey that was linked to the Washington, D.C.-based National Association of Realtors and broadcasted in an email to more than 100,000 of its members. Hometech Information Systems, an estimating software developer based in Bethesda, Md., provided cost-to-construct estimates for 25 remodeling projects, including modifiers for the 60 metro cities that were surveyed.

According to the magazine, the report shows that prices continue to increase for most remodeling projects, but the value of improvements at the time of resale has returned to levels similar to 2002. It says that this year's data confirms a housing slowdown for many areas of the country, but further advises that, since new construction and remodeling have been at record levels in recent years, some adjustment is simply inevitable and the current downturn indicates a return to "normal" levels.

Remodeling says this year's report was made more reliable by taking a "fresh look" at the specs for all 25 projects and many other improvements affected both cost and value data, resulting in cost-to-construct figures it believes are more accurate than previous years. It also credits 2,188 members of the National Association of Realtors for more accurate estimates of resale value and says nine regional averages were introduced following the divisions established by the U.S. Census Bureau, providing more useful points of comparison than the previous four.

Results show the highest percentage of cost was recouped by upscale siding replacement projects, using fiber-cement - clocking in at 88-percent based on the national average, but midrange siding projects using vinyl followed close behind at 87.2-percent.

Returns varied for window replacement projects between upscale and midrange, even when both categories used wood products. The highest return was in the midrange for wood, coming in third overall and recouping 85.3-percent of cost according to the national averages, but vinyl showed a better return in upscale projects, recouping 84.7-percent, though midrange projects were just a percent behind on average. On average, all window replacement scenarios recouped between 83.7-percent and 85.3-percent of job cost at the time of resale.

Midrange minor kitchen remodel projects ranked only slightly above bathrooms at 85.2-percent and 84.9-percent respectively, but graduating to a major kitchen remodel shaved off more than five-percent, dropping the total cost recouped to 80.4-percent. Midrange deck additions recouped an average of 76.8-percent nationally, but sunrooms fell considerably behind at 66.3-percent.

Among the 25 projects listed, none fell below a 63.4-percent return, but a closer look at the results shows significant variances according to region. On average, an upscale window replacement project using vinyl only recouped 74.8-percent on average in the West North Central region, while the same type of project recouped a whopping 96.6-percent on average in the Pacific region. In the article, the publication warns that local conditions often cause averages to appear high or low, even when neighborhoods from the same city are compared. It also urges readers to bear in mind that, when comparing cost estimates for actual projects, averaging tends to have a leveling effect on data and small differences in size, scope or finish quality can affect final costs.