Home Improvement Projects : How Much Equity Will You Build?

Dec 12, 2011

Is that next home remodel worth it?

Home improvement projects are booming, expected to cross $110 billion in total volume this quarter.  Unlike in recent years, however, the projects aren’t helping to create much new home equity.

According to Remodeling Magazine’s Cost vs Value Report 2011-2012, for each home improvement dollar spent in 2012, homeowners can expect to recoup just 58 cents in home equity. This figure is down sharply from 2005, when the cost-to-value ratio was 87 percent. 

Today’s Colorado homeowners get a much smaller payoff on their home improvement projects.  If you’re planning to remodel/update in preparation for sale, consider the following projects, each of which carries a high cost-to-value ratio. From Remodeling Magazine’s “Mid-Range Project” list :

  • Steel Entry Door Replacement:  Cost, $1,238; Recoup, 73.0%
  • Attic Bedroom:  Cost, $50,184; Recoup, 72.5%
  • Minor Kitchen Remodel:  Cost, $19,588; Recoup, 72.1%
  • Garage Door Replacement:  Cost, $1,512; Recoup, 71.9%
  • Wood Deck Addition:  Cost, $10,350; Recoup 70.1%

By contrast, other projects carry a low cost-to-value ratio, and should only be undertaken if the project’s utility exceeds its cost.  These projects don’t do much to raise a home’s resale value.

  • Home Office Remodel:  Cost, $27,963; Recoup, 42.9%
  • Sunroom Addition:  Cost, $34,133; Recoup, 45.9%
  • Backup Power Generator:  Cost, $14,760; Recoup, 47.5%
  • Bathroom Addition:  Cost, $5,125; Recoup, 51.0%
  • Fiberglass Entry Door Replacement:  Cost, $3,536; Recoup 56.3%

In the “Upscale Projects” category, projects including the replacement of doors, siding and windows, occupy the list’s first 6 slots in terms of cost-to-value. If you’re planning a home improvement project over the next few months, the timing is right — both contractor costs and material costs are low nationwide, and improving a home can extend its useful life.

See the complete Cost vs Value report online.

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