Note: An old story — but this research is updated annually!
How much money will you make on that lovely new kitchen or bathroom when you go to sell your house? Oopsy — likely not one penny. In fact, according to the 2011–12 Remodeling Cost vs. Value Report (www.costvsvalue.com), released last week, you will lose 30-35% — or more — on most home remodeling projects, even “mid-range” ones. This gap is the worst in nine years, since the survey began in 2003. For example, a “minor” $19,588 kitchen remodel? Expect not to recoup — that is, expect to lose — more than $5,000 on that “investment” when you go to re-sell. Debbie Downer reports…
This much-cited Remodeling Cost vs. Value research report is completed annually by Remodeling Magazine, and includes data gathered in collaboration with HomeTechPublishing, the National Association of Realtors and Realtor Magazine. It looks at 35 popular home remodeling projects, year after year, to assess the returns (read: losses) of each project upon resale. The magazine does a really nice job reporting the data and explaining the survey on their website — see it here for info on costs vs value for each project.. and there are regional reports, too. Ugh, I think that I am also reading that the gap between remodeling costs and value recovered on resale (loss) is the worst since the research was started in 2003.
One of the biggest pet peeves in my life, I’m serious,
is the way these findings are soft-pedaled every year
For example, Reuters covered this 2011 Cost. vs Value report, and here is one of their sentences:
Remodeling projects earn back 57 percent, on average.
True enough. So I cannot argue. But, this is definitely a “glass half full” way to state the findings.
Hey, let’s pretend they were talking about the U.S. stock market — say, the Dow Jones Industrial index — instead. Would we see this headline:
The Dow Jones Industrial Average earned back 57% last year.
Or this one:
The Dow Jones Industrial Average plummeted 43% last year (sending the world into another global Great Depression.)
I repeat, hitting thee over the head: ‘Earning back 57%’…means you just lost 43%. Every project, every situation is going to be different, but taking these numbers at face value, chances are, you are not improving your home’s value with remodeling projects if you count the money you put into the update. You are going to come out with le$$, not more $$.
In other parts of the Reuters article, the message was ‘more in your face’ about the gap. But to me, the story did not seem ‘alarmist.’ It was kind of… peppy. Ack! These numbers are dismal, shocking. Even in “bubble days,” the return was only 76%, that is: The loss was 24%. Am I missing something?
One of reasons this blog’s tagline is “Love the house you’re in” is that I *think* I have long understood that unnecessarily “updating” your home to reflect what is trendy today is not a particularly sound financial investment. In fact, what’s trendy today… will likely be ‘hideous’ in about 10 years. In the same vein, I also read somewhere that even getting the 50%-80% return/20%-50% loss indicated by these figures assumes near-immediate resale… that is, today’s updates begin to depreciate, immediately. So, contrary to a lot of what’s in the mainstream: We talk here about keeping your “outdated” vintage bathrooms and kitchens, if they are in good shape. And if renovations are required, I am an advocate in choosing styles that are harmonious with the original architecture of your home — in this way, your interiors will be “dated” to match the date of your house.
Spend money on your house? Of course! Americans love their homes, and are likely to continue to want to improve and update them. Moreover, a home can be one of the greatest life-investments you will ever make — in creating memories for yourself, family and friends… for providing a creative outlet… for building and being part of a community. So, you will want to make it “yours.” But, get back all the money you put into the modern new kitchen and then some? No no no! Read the report, and be thoughtful and realistic about the goals of your remodeling projects … unless money is just not an issue.
Data cited © 2011 Hanley Wood, LLC. Complete data from the Remodeling 2011–12 Cost vs. Value Report can be downloaded free at www.costvsvalue.com.
JKaye says
Great topic. We had our modest ’59 ranch on the market for awhile this year. We don’t have to move, we just would like to be in a similar house in the same part of town that has a better floor plan and more garage space or a basement for my husband’s hobbies. We took the house off the market after a few months when we got so little interest. We knew going in that any profit that we made on the place would go toward the agent’s fee, but, we had been willing to do that to get into a house that would meet our needs better. But when we realized we’d be dipping even deeper into the equity to cover that fee plus closing costs on the next place, which was also going to have a bigger price tag, we got less interested in moving. On top of that, most of the houses we were interested in had had kitchen and bath renovations that we disliked, with ceramic flooring in those giant squares that seem way too big for the size of the room. Those renovations were a big reason why the houses, which were similar in size and location to our current house, had the bigger price tags. I found I can handle living in a house that has an old kitchen/dining area I don’t like. But I can’t handle moving into a house that has a newly renovated kitchen/dining area I don’t like!
Zoe says
I feel exactly the same way! I can deal with an old house with a funny layout, but it irks me to pay more $$$ for someone’s idiotic idea of an “upgraded” kitchen. I’ve found more ranch houses with horrible 1980s and 1990s kitchens in the than you can imagine, with 200K+ price tags, that I’d have happily bought for the same price if they only had their original kitchens.
clampers says
I know I am a day late to this conversation but wanted to add something about the “starter home”…do other people on this site think that the whole concept of a “starter home” is a crock? Or do you all support that idea, of buying small and then “trading up” later on?
I am 28 and my spouse and I just bought our first house, a 1968 rambler with a walk-out basement…4 beds, 3 baths, 3 living rooms (ha!), fireplace, 2-car garage, deck, patio…because the basement is finished, the whole place is approx 2,300 square feet.
We got a steal of a deal on this thing! This is not a starter house! We decided that, since we are young with student loans up the wazoo and the economy is…unpredictable at best, we should find a house that we could LIVE IN for a loooooong time. This meant that we had to expand our search outside of our beloved city limits and find something in the (gulp) suburbs. Yeah well who knew living in the suburbs was so awesome! We love it! (I know there is a lot of support on this site for pro-suburbs.)
Coincidentally, we both got pretty sizable pay increases after we closed on the house. So instead of paying $1,100 per month (which is what our mortgage is), we pay $1,400 a month and plan to make an extra payment at tax time. It’s a great feeling to look at that total the next month and see it actually MOVE.
So, the starter home…isn’t that just a concept coined by the real estate industry anyway? Or am I totally off on that one? What happened to buying a house that you can raise your kids in, retire in, even die in? (Because it’s a rambler, we really could grow old in this house, minimal stairs and whatnot.)
Anyway, I don’t want to make anyone mad or step on toes. Just voicing my humble opinion. 🙂
pam kueber says
I for sure have an opinion. Maybe we should do a whole different story about this topic….
Rita@thissortaoldlife.com says
Recently wrote about the joys of my 70s suburban neighborhood on my blog. Moved there for the same reasons you did–it’s practical and affordable. I can’t believe there aren’t more people who’ve figured this out! (Well, I predict it’s the next big thing…) We got a great house for a great price. Our only complaint: The “updates/upgrades” that are the topic of this post. We’re the 4th owners, and we’re trying to figure out what to restore, what to keep, what to go new with, and where the sanity line is (so we can walk it). We hope to be where we are (and love it) for a good long time. I see myself only making one more move in my life–to a smaller place once our kids are grown and gone. Maybe that’s the ender house?
pam kueber says
Hi Rita, see my recent story on 70s houses being the next big thing: https://retrorenovation.com/2011/10/10/renovating-1970s-houses-the-next-big-thing/
I say: Renovate 70s style. That way, your interiors will always be “dated” to your house.
1927 Craftsman says
Agreed! Restore it to date as much as possible, while making it clean, comfortable & functional. That doesn’t always mean backdated ‘strict’ period style. Just do a little research (on this GREAT site, TY!) on what finish materials they would have used in your houses era & make it yours!
EngineerChic says
I’m struggling with this dilemma now. We moved 2 yrs ago due to a corporate relocation & we lost a TON of money on the house we sold (close to $90k). As a result we bought a house that is dated & needs some help.
I’ve always been the kind to say, “If I’m going to do it, I’m going to do it right.” So I buy the more expensive windows & doors, I insulate the heck out of the place, and I stick with the same level of trim on the outside.
We have the money to do a dormer addition, and we need the extra light & space & air circulation upstairs. We never plan to move – I’ve told my company that I’m staying put (and since that was my 3rd move for them, I’m well within my rights). But I almost want to cry when I think of the money leaving our savings and never coming back.
I can’t say I regretted the previous homes & the work we did on them, but I know we’re $90k behind where we would be if we’d chosen to rent. It’s making it hard to feel good about renovating again – even though I want to.
Marion Powell says
Wow! What a great topic. It’s so interesting to hear how others are riding out this depressed housing market.
I really am thankful for this blog and finding it. I used to look for the faults with my house but now I think of all the great things about it. And when I want to redecorate, I go with what I like and keep it as cheap as possible without losing the effect I was going for. For example, I used some free white tile and added some not too expensive delft tiles as accents in my kitchen backsplash. It’s homey, old fashioned, unique, and not a bit boring.
Also, I’ve always complained that we never made any money on our houses when we moved for job reasons. But I am so glad we were able to stay in this house for 16 years as opposed to the 2-3 year average in our previous houses. And as I mentioned before, I’m loving it more each year.
jeanne says
Ah, the “greatest generation.” My WWII vet father and mother bought their first and only home in 1952 (1200-1400 sq. ft. story-and-a-half brick bungalow) and lived there until my dad retired (a teacher) at 55 in 1980 or so. They never did ANY major remodels. The most they ever spent was probably new living room furniture a couple of times, besides regular maintenance like a new roof, etc. They had the same linoleum floor and brown tile kitchen counters the whole time. BUT, they paid it off and raised three kids in the meantime. They retired to Florida to live in the home my grandpa left them. My dad is now 87 and has been retired longer than he worked!! That won’t be an option for most of us ever again!
I bought my first home in 1981 for $45,000 and my monthly mortgage payment was just under $800 (17.25% at the time!). I’m in my fourth home now and it’s a small brick story-and-a-half 1952 bungalow and my mortgage payment is roughly the same (a little less) with a 5.325% interest rate. As we sold and bought new homes (well, they’ve all been built in 1948-1952) any profits we made just went into the down payment of the new homes, so it’s really been an even playing field along the way (except my last home where my 2nd husband put a $65,000 2-bedroom/1-bathroom addition to accommodate all the kids). We lost money on that one.
Not really realizing until I started following this blog, but EVERY house I’ve bought has been as a second owner. I realize now why. I LIKE the fact that each house really didn’t have many updates and were all pretty much original to the late 40s/early 50s time period that they were built. I just wasn’t attracted to homes that had multiple owners and MULTIPLE updates from multiple periods of time. Weeks away from finalizing my 2nd divorce (not to be a “Debbie Downer”) and I’m living in my bungalow by myself. It’s just the right size and easy for me to manage and do updates. I used to joke that I’m middle aged and in a starter home, but it’s more realistic to live in a smaller home as a “finish” home. I’d much rather spend my time doing things I enjoy than worrying about how I am going to take care of my home. Although I just discovered a roof leak and need to deal with that. ugh.
Carole says
Though we have always made money on the houses that we’ve moved in to, fixed up, and resold, that was never our intention at the times of purchase. We bought the homes because they were what we were looking for. When we remodeled and decorated, we didn’t go ‘trendy’, we simply remodeled to make the homes more livable, and more of what we had envisioned. I have been told more times than I care to count, that we should remodel with resale in the back of our minds at all times. Maybe to some extent a homeowner should do that, but if plans are to live in a house for any length of time (and sometimes you end up staying longer than you expected to), I’ve always thought the home should be updated to suit the current homeowner, not with an eye towards what someone else may want. I don’t plan to live with white walls and boring decor to suit some future buyer. I’m the one living here now.
Keep things classic (I say the same thing about clothing), and make a home comfortable, aesthetically pleasing, and as livable as it can be. For you.
Don’t go into it expecting an investment. Do it because you and the house deserve it (or need it).
*quote*this notion that a 1500 sq ft ranch isn’t enough*unquote*
What’s funny to me about that comment is that I’ve always lived in ‘smaller’ homes (1700 sq ft or under). I’ve never found them lacking, but very comfortable and easy care (except during remodeling time ~ sigh ~). Some small homes do feel cramped and dark, but that’s generally not the square footage that’s to blame, but the layout.
I have never wanted a house so big that I feel isolated from everyone else in it. Besides, I don’t like to clean house that much anymore. lol Smaller homes are easier, in more ways than one.
Chris H says
Wow, so many wise people who are careful about how they spend their money – makes you wonder why there was a housing bubble 🙂
You folks in CA might not want to read this – we bought 25 years ago for just under $30K. (This is Michigan) 3 bedrooms, 1 bath, 2.5 car garage, small yard.
We’ve only spent on what I’d call maintenance – e.g. new furnace, new roof (did that myself) New non-retro appliances as needed.
The house was worth more 7 or 8 years ago than it is today, but it’s still worth more than we paid – unless you consider the interest on a 30 year fixed mortgage. We’ll pay off a couple years early, but we’ll still be behind when interest is considered.
OTOH, mortgage payments will stop, and all that money will go to remodeling/redecorating – until we have it the way we want it. We’ll be able to afford the renovations and they’ll be undertaken for our own pleasure, not for resale value.
Even so, I expect well loose less than 43% simply because we are going to do 98% of the work ourselves.
Peggy Miniard says
All I know is I bought my little 1950’s Ranch house in a great location on the outskirts of the historic section in the City of Aiken. Some of the realtors and others thought someone with money would buy my house and tear it down….I bought it, and spent 50 grand on updating the systems in the house. From Roof to Drain lines. I still “thought” I had to redo the orginal bathrroms and put in a granite counter top etc etc….Now I dont believe that anymore. and Its a RELIEF…..so much easier to replace the new tile in my kitch with hardwoods? and I’m done. I kept the orginal cabs, had them refinished, and put on “new” vintage look alike pulls…will keep the faux butcher block counter top and the orginal bathrooms…so much cheaper…and such a relief. and they are not going to go out of style anymore than they already are! I dont care about who looks down their nose…I have come to peace with my little retro house, in fact I LOVE it!
Dana @ Cooking At Cafe D says
Way to put it, Pam!
If the stock market – or the US dollar dropped 43% we’d be screaming in the streets.
Imagine this.
You need a quarter so your kid can get a gum ball.
You give the cashier a dollar and she hands you 57 cents back!
Thanks for all the info – everyday!
Dana
(Repentant destroyer of 2 pink bathrooms)
Elaine says
We have a 1964 colonial and have put over $50,000 into improvements, plus many more megabux into maintenance. We converted our big screened porch into a four season sun room, and we gutted our master bath and replaced it with all new, up to date tiles and fixtures. We have all new roof, siding, HVAC and windows. With the housing crash, we might just break even on the original cost plus improvements, considering current market prices in our neighborhood. Only our four season sun room and the new master bath are likely to be attractive selling points, the rest of the house (dated, restored and serviceable) will likely be rehabbed by buyers who watch HGTV. Thing is, we did the work for US, not the buyers, so we have no complaints if we do lose money.
Things like new siding, roof, water heater, HVAC are all upgrades, but not particularly recoupable at sale. They are just things that make one house more attractive than a similar house without the upgrades.
Elaine says
Now, the 1963 time capsule in FL is supposed to be “an investment.” Mind you, the decor is pristine 1960s, which we want to preserve as much as possible. It was very well built. We got it at a magnificent price because it was sitting empty and deteriorating and the kids were tired of trying to keep up with it. So, it immediately needed the neglect taken care of, new roof, HVAC and plumbing and electric work. $$$$. We budgeted $30,000 to “bring the systems up to date.” That would bring the cost of the house up to the original asking price. Neighborhood prices were running about $20,000 higher for updated houses. At this time, though, prices are still dropping in that area.
Now that’s done we can look at making it work for us while we enjoy our winter escape and investment. Replacing the shag carpet which was loose but not in real bad shape was done after it tried to hurt me (tripped me and threw me on my knees on the cement floor, it did). Plus, I loved that look in the 70s, but am over it now. Unfortunately it was just plain cement underneath, not terazzo. We put warm creamy ceramic tile throughout. We took down part of a wall to open up the kitchen and then rearranged the kitchen, and we are adding a shower and laundry to the half bath off our bedroom. The laundry was actually on the back porch, not uncommon in Florida but not doable for me. I think that will do it, and will put our costs about where we expected. The house will be a lot more sellable, but we do plan to keep it and enjoy it as long as we can.