Most Profitable Renovations

Renovation returns bring in less profit than 2005, upscale residing only recoups 88%
Renovation returns bring in less profit than 2005, upscale residing only recoups 88%

RISMEDIA, December 12, 2006-Renovation costs are shooting higher and homeowners are getting a lot less bang for their remodeling bucks, according to a report by the National Association of Realtors (NAR) and Remodeling Magazine.

Last year, for example, adding a master bedroom suite to a house cost an average of $75,959 nationwide and boosted the home’s resale value by $64,419 – that’s 84.8% of the cost recouped. The same job this year cost a lot more – $94,331 – and returned just $68,458, or 72.6%.

The Harvard University Joint Center for Housing Studies estimates that Americans will spend nearly $160 billion for home remodeling projects over the next 12 months.

Many costs associated with remodeling have spiked. Last year, the national average for a midrange kitchen renovation was $43,862, according to NAR. But this year, that average cost had leaped to $54,241. Hard to make up that difference when NAR reported that home prices have actually fallen in the past 12 months.

A year ago, many remodeling jobs returned 80% of their cost or more when the owner sold the house. Some of the most profitable renovations, such as an upscale residing, actually paid off more – 103.6% – than they cost.

Other profitable renovations included midrange kitchen remodelings, which paid off 91.7%, and window replacement, which paid off 89.6%.

This year, an upscale residing only recoups 88% of its average cost of $13,499 (up from $10,393 12 months ago). That still made it the most profitable renovation.

A midrange kitchen remodeling returns 80.4% of its average $54,421 cost and a window replacement earns 85.3% of it $11,040 cost.

The least profitable renovation, again this year, is a home office remodel. It recoups only 63.4% of its cost.

There are lots of regional differences in the benefits of remodeling jobs. A midrange bathroom renovation pays off a lot more on the Pacific Coast (103.2%) than it does in the Plains states (74.8%) or the Great Lakes state (71.8%).

Part of the difference stems from the generally depressed home resale prices in the Midwest compared with the elevated home prices on the Pacific Coast.

In the Middle Atlantic states a vinyl siding replacement returns 92.3% of its cost, well above the national average of 87.2%, while in the Southwest the same job returns just 80.9% of the cost.

Generally, projects done in the Pacific states and the Atlantic South return a greater percentage of their costs than the other regions of the country.

Overall though, NAR president, Pat Vredevoogd Combs cautions homeowners to take the data with a grain of salt.

“Many factors affect a home’s value,” she said, “and, consequently, the resale value of any given remodeling project.?

Source: CNN.com.