2005 COST VS. VALUE REPORT
Cost data for the report come from HomeTech Information Systems, a remodeling estimating software company in Bethesda, Md. HomeTech collects current cost information quarterly from a nationwide network of remodeling contractors and employs an adjustment factor to account for regional pricing variations. Construction cost figures include labor, material, sub-trades, and contractor overhead and profit.
Some homeowners believe that they will get full value dollar for dollar for their improvements. As the chart below illustrates, this is not usually the case.
|
|
Job Cost |
Resale Value |
Cost Recouped |
|
Bathroom Remodel |
|
Midwest Average |
$11,047 |
$ 9,885 |
89.5% |
|
Detroit |
12,410 |
12,333 |
99.4% |
|
Kitchen Remodel |
|
Midwest |
$15,426 |
$13,151 |
85.3% |
|
Detroit |
16,685 |
9,688 |
58.1% |
|
Siding Replacement |
|
Midwest |
$7,280 |
$ 6,959 |
95.6 |
|
Detroit |
8,119 |
5,689 |
70.1% |
|
Attic Bedroom |
|
Midwest |
$41,281 |
$33,752 |
81.8% |
|
Detroit |
46,449 |
36,222 |
78.0% |
|
Deck |
|
Midwest |
$11,585 |
$ 9,869 |
85.2% |
|
Detroit |
12,432 |
7,167 |
57.6% |
|
Basement Remodel |
|
Midwest |
$53,114 |
$38,767 |
73.0% |
|
Detroit |
58,782 |
$26,889 |
45.7% |
|
Roofing Replacement |
|
Midwest |
$12,401 |
$ 8,674 |
69.9% |
|
Detroit |
14,408 |
7,962 |
51.3% |
|
Window Replacement |
|
Midwest |
$10,139 |
$ 8,484 |
83.7% |
|
Detroit |
10,890 |
9,111 |
83.7% |
|
Home Office Remodel |
|
Midwest |
$14,120 |
$ 8,690 |
61.0% |
|
Detroit |
15,785 |
6,722 |
42.6% |
|
Family Room Addition |
|
Midwest |
$57,599 |
$41,842 |
72.6% |
|
Detroit |
$65,393 |
$41,389 |
63.3% |
What do the numbers mean?
If some remodeling job cost figures appear too high or too low, one cause is the leveling effect of averaging. The demand for and cost of remodeling services can vary greatly within a given metro area.
Averaging also affects the value side of the equation. The amount recouped for an actual remodeling project depends on the condition of the rest of the house, as well as the value of similar homes nearby, the availability of new homes, and the rate at which property values are changing. Location in an urban, suburban, or rural setting will also affect a home’s value.
In some cases, the value of the remodeling project at resale is more than 100 percent of its original cost. This usually happens in markets where property values are rising very rapidly, but it can also occur when buyers regard certain types of remodeling project as “standard.”
For example, in a neighborhood where most homes have an updated kitchen, remodeling a kitchen may well increase the resale value of the home beyond the cost of construction. In some cases, in fact, not redoing the kitchen could cause the home to sit on the market for much longer than normal and to eventually sell for less than similar homes in the area.
Keeping up with the Joneses can be a savvy investment move. But ultimately, the best reason for a remodel is to enjoy it. – Sal Alfano, editorial director of Remodeling magazine, and Christina Hoffmann Spira, managing editor of Realtor® Magazine.
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