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.