Key Highlights
- According to Remodeling Magazine, renovation cost-to-value ratios or returns on investment (ROIs) for 2020 coming in at 63.7%
- This ratio is down from 2019 and below last decade’s high of +71%
- 9 of 10 leading remodeling investments are outside
The remodeling/renovations market has been fueled by the fact that all American homeowners, not just Boomers, are extending their home tenure to 8+years. According to a recent study by Redfin, the average homeowner is spending 13 years in their home, up from 8 years in 2010. In some markets, Salt Lake City, Houston, Ft. Worth and Dallas, some owners are staying upwards of 20 years.
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So what does this extended home tenure mean for the remodeling market? Which renovation projects make the most sense in terms of being able to count on a solid return on investment?
Clayton De Korne, editor-in-chief of Remodeling Magazine, said that nine of the ten leading remodeling investments are outside. The biggest ROI, a whopping 97% ROI, is manufactured stone veneer. Garage doors generate a 94.5% ROI. A midlevel kitchen remodel generates an ROI of 78% but Korne said that owners get a better return on window replacements, new decking, new front doors and upgraded siding…all exterior work.
De Korne said, “It’s all about curb appeal. I do think there is a whole psychology about that first impression…that potential buyers think the house is well-put-together. From a remodeling standpoint, it’s mostly aesthetics, although it is a lot about protecting your home from water. Am I going to have mold? Am I going to have rot?”
De Korne advises sellers to remember several things…
- ROIs vary by region – kitchen and bathroom remodels are big in the Midwest but not elsewhere.
- building and material costs vary as do home values. “The cost part of it works against us.”
- Kitchen and bathroom remodels are more popular but exterior remodels are more cost effective.
- Kitchen and bathroom remodels are big in the Midwest but they can be “tricky.” Because such remodels are aesthetically personal…a buyer may not like what a seller has done.
Thanks to HousingWire and Remodeling Magazine for source data.
