Remodel and watch your “investment” plunge in value: 2011-2012 data is worst in 9 years

home sweet money pitNote: 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?

love the house you're inOne 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.

CategoriesBathroom Help
  1. Jill says:

    I’ve been trying to find information that addresses this very subject. I was looking to remodel the kitchen in my 23 year old condo. It’s the original kitchen with plain boring painted cabinets, tile countertop, lowered ceiling. I couldn’t justify spending $28-30,000 on a remodel for a place I will be selling in 6 or 8 years. From what I read, the return on investment on kitchens is 67%-89%, so essentially I’d be losing $3300 to $11000. I keep thinking “why would I do this?” This is not my forever home, why should I essentially give this money away to the next owner? Just to make the place sell faster? I can’t seem to find a reason why I should suck up this financial investment. Why doesn’t anyone talk about this? Seriously, I’m not asking a rhetorical question; why would I do this?

    My condo has a lot going for it already: highly desirable location, hardwood floors, and 2 extras: deeded extra parking in garage, 1 of 2 units (out of hundreds in complex) with extra giant private patio. An identical unit without the 2 extras has it’s kitchen redone and is trying to sell for $348,000. I bought for $232,000 14 years ago.

    Please give me an opinion on this logic: I’m just going to make sure the current builder’s grade kitchen is in good shape along with the rest of the condo (fix/replace wear & tear), then sell it for what the market will bear.

    1. pam kueber says:

      Yes, this is why I wrote the story — no one in mainstream media talks about this — but I do! THE NUMBERS DO NOT SUPPORT making these kinds of ‘upgrades’ as a “financial investment.” Quite the opposite. That said, if you want to spend the money as consumption, that is a logical choice, assuming you have the discretionary income left over after having 6 months living expenses in the bank, no credit card debt, at least 20% equity in your home, maxed into your 401K and how about a Roth IRA, too, that sounds like a smart idea, and also saving for your childrens’ college. Hrmph, don’t hate me, but seriously.

      In addition (and I think I wrote this in the story) unless you sell right away, the “investment” in a new kitchen or bathroom begins to depreciate right away. So, in six or seven years, the “return” would be even less than the ranges listed in the numbers shown. Oh, and the space will probably already be “dated” and the new owner will want to gut it anyway.

      I think your logic is quite sound; focus on the fundamentals. Re selling strategies see: https://retrorenovation.com/2012/07/30/how-to-sell-a-midcentury-house-full-of-original-features-we-hear-from-three-real-estate-agents-who-specialize-in-midcentury-modern/

      And this, on remodeling: https://retrorenovation.com/2014/09/15/9-tips-start-remodeling/

      1. Heart says:

        I whole heartily Agree! IMHO Jill/Pam, you are of sound mind. Your seeing through another ploy of the industry to sell products, move the economy.

        “If it ain’t broke, don’t fix it.” You will Not receive that $ back no matter what common census says to ‘upgrade’ your kit/bath. Your right Pam the next person will want to put their ‘personal’ stamp on it & redo it anyway.

        Unless… they are buying the charm of a certain ‘style/period’ home. Then remodeling with timeless features is endearing & practical/functional asset that can up to value. EX: adding a dumbwaiter to a 2/3 story 1910-30 house (or a) bead board backed pantry, a period 6ft claw foot tub, raising the ceiling in an old tiled shower & replacing the marble octagon tile floor/walls with white subway tile. Fixtures, furnishings will change with the owners personal style but the ‘bones’ are usually recognized as ‘features’ that add value. Plain & Simple.

        Great thread Pam, hope your on the mend 😉 <3

        1. pam kueber says:

          Yes, restoration of original features, or recreation of features that would have been original may be more likely to a better bet, “investment-wise”, I tend to believe. At least the date of your designs will be dated to the date of the house, harmonious with its original architecture. Even so, I suspect that renovations/restorations could still cost more than you may recoup upon resale. This is all a very tricky business.

          See: https://retrorenovation.com/2014/09/15/9-tips-start-remodeling/

  2. Debra Belton says:

    I’d like to get your opinion on removing the vinyl siding from my 70’s ranch mid century cedar home. The previous homeowner had it installed to reduce maintenance so its about 18 years or so old. I hate it! Any suggestions, yay or nay?

Leave a Reply

Commenting: Information

All comments are moderated, generally within 24 hours. By using this website you are agreeing to the site's >> Terms of Service, << which include commenting policies, and our >> Privacy Notice. << Before participating, read them in full.

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.