By Judy Dutton | Jan 11, 2018
Planning to remodel your kitchen, add a master suite, or undertake some other pricey home renovation in 2018? Watch out—not all of these home improvements pay off like they did in the past, according to Remodeling magazine's latest Cost vs. Value Report.
For this much-referenced annual report, now in its 31st year, researchers pinpointed the average return on investment of 20 popular home renovations by canvassing contractors nationwide on how much these upgrades cost to complete, then compared that with how much real estate agents estimated these features would boost a home's market price (in other words, their value).
And the news isn't so good for homeowners looking to remodel on a massive scale: The report found that in 2018, Americans should expect to make back only about 56% of the money they spend on renovations. That's down from 64% the previous two years.
What gives?
"This year, the most expensive projects didn't have much of a gain," says Craig Webb, editor of Remodeling and manager of the report. "I think it's because real estate professionals think we're getting close to a peak in market prices. So consequently, spending a lot of money does not automatically mean your house will just ride the escalator up and be worth a lot more."
Current events could also play a role. New tax laws curtailing the deductibility of mortgage interest and local property taxes might be dampening real estate agents' confidence that piling on the improvements will pay off. Plus, recent wildfires, mudslides, and other natural disasters have created what Webb calls “a freight train of extraordinary demand” on materials and labor that is bound to jack up renovation costs all round, leading to thinner margins on their return.
But it's not all doom and gloom. As usual, this year's report found that the ROI varied widely by project. A new garage door, for instance, essentially pays for itself, earning you a whopping 98.3% of your money back, making this the best value of the whole bunch. And the worst? Installing a back patio, which will recoup only 48% of your expenses.
Check the chart below for a full rundown of the top renovations, including how much they cost, their value at resale, and the percentage you'll recoup. And if you're looking for some general pointers, here's one: If you're going to shell out money, do it where everyone will notice—on the front of your house.
"Curb appeal projects tend to have high paybacks than inside-the-house projects," Webb continues. "Any real estate professional will tell you curb appeal matters a lot, and these numbers prove it."
This explains why garage doors top this list, followed closely by manufactured stone veneer (which offers a 97% ROI) and wood decks (83%).
Another golden rule of renovation?
"It's better to replace or repair than add and remodel," says Webb. In other words, go ahead and fix that frayed siding or replace the roof before you add a master suite or overhaul the kitchen.
Mostly, keep in mind that if your tastes are, ahem, unique, that could lead to trouble if you're expecting home buyers to swoon over the same things.
"You may spend gobs of money on what you think is the perfect kitchen remodel," Webb says. "But if your idea is to have something from the 1970s with avocado ovens, the next person could walk in and say, 'That's ugly. I don't care that you spent $75,000 on that—let's tear it out anyway.'"
Top 20 remodeling projects and their ROI
Judy Dutton is a deputy editor at realtor.com covering news and advice about personal finance, home buying, selling, decorating, and everything in between (judy.dutton@move.com). Follow @judy_dutton
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