Home prices have gone up so much that many homeowners have decided to stay put and make their own home better.
But even if you’re renovating a home to live in it, it’s still important to know what you can expect to recoup from those upgrades and improvements and what will eventually pay off when it comes time to sell. Homeowners that over-renovate a home may not get the cost of the improvement back.
For example, it’s not the spa-like bathroom or the magazine-worthy custom kitchen that provide the best return on investment, according to a new report on the impact of home remodeling from the National Association of Realtors and the National Association of the Remodeling Industry.
Instead, the interior projects that recoup the most are refinishing hardwood floors and installing new hardwood flooring.
The report estimates the cost of refinishing floors at $3,400 with an estimated return on investment of $5,000, for a 147% recovery of costs. The estimated cost of installing hardwood floors is higher at $5,000, but with a $6,500 return on investment, 118% of the cost is recovered, according to the research.
Meanwhile, the cost of a dream project – like the addition of a new primary bedroom suite – can be an estimated $182,000, with only about $100,000 of that cost recovered, making the return on investment the lowest of the projects evaluated at 56%.
After refinishing floors and new hardwood, the next best return on investment was another decidedly unsexy project: an insulation upgrade. Priced at an estimated $2,500, all of that cost is expected to be recovered for a 100% return.
Homeowners who do complete kitchen and bath renovations can expect to recoup around 75% of those costs, according to the report. With an estimated cost of about $80,000, a total kitchen renovation recoups about $60,000, and homeowners can expect to recover about $25,000 of a $35,000 bathroom renovation, about 71% of the project’s cost.
Renovating a basement into a living space offers a bit better rate of a return. At an estimated cost of $57,500, homeowners can recoup 86% of that project’s cost.
As for exterior home improvements, the projects with the best return on investment are replacing the roof and the garage doors, with both recouping all their costs.
Homeowners can expect to get back about 86% of the costs of installing vinyl siding and 67% of vinyl windows, but only 63% of wood windows.
The actual cost of each remodeling project and cost recovery are influenced by many factors, including project design, quality of materials, location, age and condition of the home, and homeowner preferences.
“Quite often, an added benefit to home renovations is the possibility of an increase in the home’s value, which is a reason why some people remodel,” said Lautz. “This is especially advantageous to a homeowner who may be considering selling their house or converting the home to a rental property.”
While the pandemic put much of the economy on pause, residential renovations boomed as homeowners reconfigured their home for new uses like work and school, even as the cost of materials and labor rose.
Americans spent $420 billion in 2020 on remodeling their homes and nearly all NARI members found a greater demand in contracting in remodeling work that year.
Of homeowners surveyed, 35% hired professionals for the entire job, 28% hired the labor but purchased the materials, and 22% did the entire project themselves.
“Homeowners tend to undertake a remodeling project for any number of reasons,” said Jessica Lautz, vice president of demographics and behavioral insights at NAR. “In some instances, homeowners were content with sprucing up a room with a simple paint job, while in other cases, families decided to take on the task of renovating an entire attic or basement to add additional living space to their home.”
About 35% of those surveyed said the most important result from their remodel was better functionality and livability. Around 22% said they had durable and long-lasting results, materials and appliances, and 14% reported beauty and aesthetics as a result of their remodel.
“The pandemic has changed the way we use our homes, and many of those changes are here to stay,” said Lautz. “As a result, homeowners needed to reconfigure or remodel how they use their home and maximize space.”