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This is the eighteenth anniversary of REMODELING's Cost vs. Value Report, which compares the cost-to-construct for a selection of common remodeling projects with the added value those projects bring at resale. This year's report expands to 18 projects, including both mid-range and upscale projects, and also increases the number of cities reporting from 35 to 60. Specpan, a Denver-based market research company, hosted, programmed, and managed the online survey, which was in the field for 60 days. Specpan also collected and compiled the data and provided on-line survey expertise and analysis. The Farnsworth Group, an Indianapolis-based consulting firm, analyzed survey data and provided pre- and post-survey consulting.
Where We Get The Data
Cost data for the Report come from Home-Tech Information Systems, a remodeling estimating software company in Bethesda, Md. HomeTech collects current cost information quarterly from a nationwide network of remodeling contractors, and its cost figures include a 40% margin. Costs are adjusted to account for city-to-city pricing variations.
Resale values do not reflect actual sales made on remodeling projects. Instead, they are based on the professional judgment of members of the National Association of Realtors (NAR) about each remodeling project's anticipated resale value. E-mail surveys containing cost and median home price data for each city were sent to more than 20,000 appraisers, sales agents, and brokers, generating 356 responses (a 1.78% response rate). According to The Farnsworth Group, the data accuracy rate is +/- 5% to 10%.
What Do The Numbers Mean?
While the data presented here can help set expectations for homeowners contemplating remodeling work, some figures will appear too high or too low simply due to the leveling effect of averaging. It's also important to acknowledge a variety of factors that can affect both the cost of remodeling and the resale value of homes.
For some projects, resale value is projected to be more than 100% of the original investment; in some cases, quite a bit more. This is characteristic of markets where property values are rising very rapidly, but also in areas where certain types of remodeling projects are taken for granted. For example, in a neighborhood where a deck is considered an expectation, adding a deck to a home that doesn't have one may well increase the resale value of the home beyond the cost to construct the deck.
Nevertheless, if resale value is a major factor in any decision to remodel, the best course of action is to consult with a remodeler on construction cost and seek an assessment of resale value from a Realtor active in the particular neighborhood.