Study Rates ROI, APEX favors Quality of Life Impact
Each year, Remodeling magazine publishes its annual Remodeling Cost vs. Value Report. The study estimates the cost of 29 typical remodeling and replacement projects in various markets and asks Realtors to assess the resale value based on comparable homes (comps). For example, if two houses were identical but one had a recently remodeled kitchen, how would it impact the home’s sale price?
The 2017 report provides you with three pieces of information to help you make a more informed financial decision regarding your remodeling project:
- On average, how much is remodeling expected to cost this year compared to last year and what will you get for your money?
- On average, how much more are the improvements likely to be worth?
- Which remodeling and replacement projects will recoup the greatest percentage of cost upon resale?
According to the report, remodeling costs are up 3 percent this year and the average value of projects is up 4.2 percent. Resale value might mean more if you are a fan of HGTV’s Flip or Flop show or are concerned about over-improving your home. But items 1 and 2 send a clear message to Twin Cities area homeowners: You will save money by remodeling sooner rather than later, and our healthy real estate market means your return on investment (ROI) will be slightly higher this year.
Curb appeal projects continue to please
Not surprisingly, the report shows that Realtors still love exterior facelifts and curb appeal projects. It’s all about making a good first impression. For instance, consider two side-by-side homes. One has a modest stoop and an exposed main entry. The other has entry portico or, better yet, a street-facing porch. Guess which one is going to be more appealing to homeowners and homebuyers alike?
Popular trends not driven by financial payback
The popularity of three remodeling trends is beyond debate: integrating interior/exterior living areas, universal design features that support aging in place, and adapting homes for multi-generational/multi-family living. But the report suggests financial ROI for these projects would not be as compelling as for some other projects. These are improvements with significant labor costs so it can be more difficult to recover those expenses.
Report’s top three remodeling, replacement projects
Remodeling divides projects into mid-level and upscale categories. In 2017, the top three mid-range projects include a steel entry door, attic sealing and insulation, and a minor kitchen remodel in that order. For upscale projects, the winners are garage door replacement, wood replacement windows and vinyl replacement windows. But none of the upscale projects came close to the mid-priced project’s ROI.
APEX view of true remodeling value
Industry studies such as the annual Cost vs. Value Report provide interesting benchmarks, but it is important to remember what motivates most of us to remodel our homes — quality of life. Ever since I founded APEX, our core purpose has been to help our clients enhance their quality of life at home. It still is what gets me out of bed each morning. My point is that prospective homebuyers may value a new entry door or garage door, but it’s doubtful those are the projects that would truly elevate your quality of life.
At APEX, we don’t need a national magazine study to tell us what delivers value. We simply listen to our clients. It’s the beautiful, high-function kitchen where they are proud to entertain. Or the finished basement that’s a magnet for their kids and friends. Or the sunny addition that quickly became their favorite lounging area. Or the enlarged garage and mudroom that made Minnesota winters tolerable. Or the new master bath with enhanced accessibility, lighting and storage.
Rising prices and mortgage rates impact remodeling
Perhaps the most important prediction, made by Remodeling’s sister company MetroStudy, is that with rising mortgage rates and home prices this year, people will be more likely to improve their current homes rather than invest their equity into buying new homes. Which takes us back to the beginning.
The smart money says the sooner you remodel the better. And I would add – invest in what you love. Homes are way more than investments. They literally shape our quality of life. — JB