The new 2008-09 Remodeling Magazine Cost vs. Value Report has shown some surprising trends. First, while the downturn in the housing market saw the resale value of home improvements decrease, the decline wasn't nearly as sharp as expected. Along with a new report from the National Bureau of Economic Research, these figures suggest the national housing market may not be as depressed as first believed.
But just as interesting, the few projects from the new Cost vs. Value Report that outperformed last year's figures were luxury remodels, specifically luxury bathroom remodels (70.7 percent) and foam-backed vinyl siding (80.4 percent). The most likely explanation for this phenomenon is the divide in the housing market. Homes in foreclosure may not be in optimal condition. Homeowners who received mortgages that already financially burdened them from the outset probably didn't have a lot of wiggle room to complete remodels. Likewise, many foreclosed homes are being purchased as investment properties, while there are still a decent number of discerning home buyers who are financially able to buy the home they really want with the luxury bathroom to match.
Luxury Doesn't Mean Expensive
While luxury bathroom remodels and upscale vinyl siding saw an uptick in its resale value, this doesn't mean the more you spend on a home remodel the more you'll recoup in additional property value. In fact, four of the six projects that saw the largest percent decrease from 2007 to 2008 were the most expensive home remodelsupscale master suite addition, upscale major kitchen remodel, two-story addition, and midrange master suite addition. Recently, homebuilders have overdeveloped the suburban real estate market, the large, but affordable suburban home has hit a snag of higher heating and cooling costs and a new generation of empty nesters. Modern, ultra-convenient amenities may still be in, but major renovations and additions aren't.
Conventional Wisdom still Applies
Keep in mind that while some luxury remodels are outperforming from last year, and midrange remodels dropped across the board, these midrange projects still hold the best overall value. The Return on Investment (ROI) for a midrange bathroom remodel is 74.6 percent, compared to 70.7 percent for upscale projects. Midrange kitchen remodels return 76 percent, compared to 70.7 percent for their upscale projects. This data supports the remodeling adage that by spreading your remodeling dollars around your entire home and sticking to a strict budget, you're going to make a better financial investment in your home.
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Home Remodeling Demand
ServiceMagic, leading online resource connecting homeowners to home improvement contractors, compiles data on essentially every home improvement in the book. While the housing market may be artificially depressing the ROI for home remodels, the demand is holding strong. Statistics from ServiceMagic show that requests over the past year from kitchen, bathroom, and basement remodels to both roof and siding installation have increasedin some cases, dramatically. Demand for asphalt shingle roofing has increased by as much as 73.6 percent, while fiber-cement siding has increased by 35.5 percent.
Where the Data Falls Short
It would be irresponsible to throw these statistics out there without admitting their shortcomings. These statistics are useful and not necessarily inaccurate or misleading, but they don't always tell the whole storyı.
For the Cost vs. Value Report, Remodeling Magazine's guidelines for specific projects frequently bear little resemblance to the projects homeowners have in mind. The Magazine's tend to skew high from what other sourcesincluding ServiceMagicestimate as average home improvement costs. You should also keep in mind that these project guidelines are tweaked from year-to-year. Last year's upscale composite deck, for example, has been reclassified as mid-range and a larger, more complicated composite decking project has taken its place.
Meanwhile, the data from ServiceMagic is a good indicator of homeowner demand but not always of actual home remodelingıonline contractor referral services are good at finding homeowners who are serious about completing home improvements, but these homeowners may not have the financial resources to complete such projects. ServiceMagic has found that online demand remained fairly constant from 2007 to 2008, but according to information from the U.S. Census Bureau and the Joint Center for Housing Studies, home improvement expenditures saw home improvement expenditures drop 9.7 percent. (Of course, these home improvement expenditure studies have their own questionable validity.)