Home prices have risen so much that many homeowners have decided to stay put and upgrade their own homes.
But even if you’re renovating a home to live in, it’s still important to know what you can expect to get back from those upgrades and improvements and what will end up paying off when it comes time to sell. Homeowners who over-renovate a home may not recoup the cost of the upgrade.
For example, the spa-like bathroom or the magazine-worthy custom kitchen don’t offer the best return on investment, according to a new report on the impact of home renovation from the National Association of Realtors and of the National Association of the Remodeling Industry. .
Instead, the interior projects that recoup the most are refinishing hardwood floors and installing new hardwood floors.
The report estimates the cost of refinishing the floors at $3,400 with an estimated return on investment of $5,000, for a cost recovery of 147%. The estimated cost of installing hardwood floors is higher at $5,000, but with a return on investment of $6,500, 118% of the cost is recouped, according to the research.
Meanwhile, the cost of a dream project – like adding a new master bedroom – can be estimated at $182,000, with only about $100,000 of that cost recouped, making the return on investment the lowest of the projects evaluated at 56%.
Better ROI on projects
After refinishing floors and new hardwood, the second-best return on investment was another decidedly unsexy project: an insulation upgrade. Valued at around $2,500, this entire cost should be recouped for a 100% return.
According to the report, homeowners who complete full kitchen and bathroom renovations can expect to recoup around 75% of those costs. With an estimated cost of around $80,000, a total kitchen remodel recoups around $60,000, and homeowners can expect to recoup around $25,000 from a $35,000 bathroom remodel, or around $71 % of project cost.
Renovating a basement into a living space offers a better rate of return. At an estimated cost of $57,500, owners can recoup 86% of the cost of this project.
When it comes to exterior home renovations, the projects with the best return on investment are replacing the roof and garage doors, both of which recoup all of their costs.
Homeowners can expect to recoup around 86% of installation costs from vinyl siding and 67% from vinyl windows, but only 63% from wood windows.
The actual cost of each renovation project and cost recovery is influenced by many factors, including project design, quality of materials, location, age and condition of the home, and homeowner preferences. .
“Very often an added benefit of home renovations is the possibility of an increase in the value of the home, which is why some people renovate,” Lautz said. “This is especially beneficial to a homeowner considering selling their home or converting their home to a rental property.”
Who is renovating and why
As the pandemic put much of the economy on hold, home renovations have exploded as homeowners reconfigured their homes for new uses like work and school, even as the cost of materials and labor was increasing.
Americans spent $420 billion in 2020 to remodel their homes, and almost every NARI member saw greater demand for renovation work contracts that year.
Of the owners surveyed, 35% hired professionals for all of the work, 28% hired the labor but purchased the materials, and 22% did the entire project themselves.
“Homeowners tend to take on a renovation project for a number of reasons,” said Jessica Lautz, vice president of demographics and behavioral data at NAR. “In some cases, homeowners were content to spruce up a room with a simple paint job, while in other cases, families decided to undertake an entire attic or basement renovation. to add extra living space to their home.”
Around 35% of respondents said the most important result of their renovation was better functionality and liveability. About 22% said they had durable and long-lasting results, materials and appliances, and 14% reported beauty and aesthetics as a result of their renovation.
“The pandemic has changed the way we use our homes, and many of those changes are here to stay,” Lautz said. “As a result, homeowners had to reconfigure or redesign how they use their homes and maximize space.”
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