Remodeling Magazine released its 32nd annual Cost vs. Value Report, which compares the cost of popular remodeling projects to how much the investment will improve a home’s resale value.
The 2019 report surveyed more than 3,200 real estate professionals about returns for 22 projects in 136 U.S. markets, an increase from 100 markets last year. The full report is posted online.
For all projects, the overall cost-to-value ratio is 66.1 percent, which is slightly ahead of last year but well below the decade-high of 71.2 percent in 2014.
As in prior years, there are significant variations in different regions. The average payback nationwide for the 22 projects in the 2019 Cost vs. Value report ranges from a high of 123.8 percent for a garage door replacement in the Pacific region, to a low of 45.0 percent for an upscale master suite addition in the mid-Atlantic region.
“With the increasing costs of building materials and labor, we urge remodelers to think like real-estate professionals first,” says Clayton DeKorne, editor-in-chief of Remodeling Magazine. “When you adjust your focus to think like a broker first, you can dull clients’ No. 1 pain point – cost – with a discussion of the amount that can be recouped, then go on to show them how to think like a remodeler by raising their understanding and appreciation of the total value, not just resale value, of a home.”
Due in large part to sharp increases in material costs, the percentage of costs recouped at sale time is trending downward for all the replacement projects. Material costs tend to comprise a greater proportion of replacement projects compared with larger indoor remodels, however, which have a higher percentage of labor costs.
2019 top 10 projects by percentage of cost recouped
- Garage door replacement (97.5%)
- 2Manufactured stone veneer (94.9%)
- Mid-range minor kitchen remodel (80.5%)
- Wood deck addition (75.6%)
- Siding replacement (75.6%)
- Steel entry door replacement (74.9%)
- Vinyl window replacement (73.4%)
- Fiberglass grand entrance (71.9%)
- Wood window replacement (70.8%)
- Composite deck addition (69.1%)
Highlights from 2019 report
1. Rising materials costs impact rates of return
While the overall changes are modest, the latest Cost vs. Value report reflects the robust market the remodeling industry has enjoyed over the past year. But costs have correspondingly increased, and in some cases, significantly so. These increases are likely due to the tariffs that have roiled commodity markets, which have led to a slight downturn in the percentage of costs recouped for some projects; but overall, returns are up slightly compared to last year.
2. Curb appeal projects continue to provide the highest returns
Nine out of the top 10 high-return projects are exterior replacement – or high curb appeal – projects. The three exterior projects with the highest recoup on investment are garage door replacement (97.5%), manufactured stone veneer installation (94.9%), and a wood deck addition (75.6%). Siding replacement and window projects also provided high returns, with the highest recouping interior project being a minor kitchen remodel (80.5%).
3. New for 2019
Two new projects were added to the 2019 Cost vs. Value Report. The first is a roofing replacement job that adds standing-seam metal roofing. Compared with asphalt shingles, metal roofing costs significantly more but brings with it much greater durability. The second project is a revamp of the universal design bathroom, which was first introduced to Cost vs. Value in 2017. While the overall dimensions and features of the current project are comparable, the finishes and mechanicals – including tiled walls and shower, humidity-controlled ventilation and radiant-heat floors – are more consistent with an upscale project than the previous specs allowed.
4. Think like a broker
The reason for high returns on exterior projects, and especially façade facelifts, stems from the valuations set by the real estate community. “Curb appeal” and “first impressions” are central to a real estate professional’s estimation of resale value. Granted, a home’s exterior will only persuade potential buyers to see more, and first impressions can vary from one individual to the next. But the impact these impressions make is critical in setting the stage for what a buyer is willing to pay for a home.
© 2019 Florida Realtors®