This year marks the 20th anniversary of REMODELING's Cost vs. Value Report [www.costvsvalue.com]. It began as a way to help our readers answer two important questions on the minds of most remodeling customers: How much will my project cost, and will I get most of my money back if I have to sell?
In the last five years, the Cost vs. Value Report has evolved largely due to improved e-mail sampling techniques and the ability to display results on the Web. Prior to 2002, we limited data to 10 projects — 5 “core” projects that appeared every year, and 5 others that rotated from a dozen or so additional projects we track. That year, however, we began working closely with Specpan, which provided the means to conduct a Web-based survey, and with the National Association of Realtors, which gave us access to its membership. The result: more reliable data about more projects each year.
In 2002, responding to reader complaints that our figures were too high or too low, we introduced a range of results for some projects. On the cost side, our answer was to list some “upscale” versions of projects, with specs that typically include a broader scope of work, more detail, and higher quality products and finishes.
On the value side, we set out to improve the survey results by gathering data from more real estate professionals, and raising the number of respondents from about 500 in 2002 to more than 2,700 this year. We also increased the reliability of the numbers by grouping results according to the U.S. Census Bureau's nine regional divisions.
WHERE'S THE VALUE? Not surprisingly, this year's data confirm what we all know: The housing market is in a slump.
Across all projects, the share of construction costs recovered is down compared with last year, although the rate of decline has slowed. And some parts of the country are doing better than others, notably New England and Mid-Atlantic cities, but especially the Pacific region (California, Oregon, and Washington), where remodeling costs recouped at resale are 14% higher than the national average.
On the other hand, some of the hottest remodeling cities in the southeast and southwest are performing below the national average. This could be because these areas are also the most active in the country for new housing and, with the housing glut, new-home prices are dropping, taking resale values down with them.
That said, remodeling is still a pretty good investment. Two-thirds of this year's projects return between 65% and 80% at resale. That means homeowners are still paying just 20 cents to 35 cents on the dollar for more space, better space, different space.
Sal Alfano, Editorial Director