The value of a remodeling project at resale is always subject to factors that are difficult to predict. Changing how a space is used may meet the immediate needs of the current homeowner, but may be at odds with what prospective buyers are looking for. Converting a small bedroom into a grand master bath, for example, may be perceived by a prospective buyer as the loss of a bedroom rather than the gain of a luxury bathroom. Similarly, adding square footage may solve immediate space needs, but it also adds to maintenance costs. Additions may also affect energy costs, although current codes ensure that most additions will perform as well as or better than the rest of the existing house. And remodeling projects are often seen as an opportunity to upgrade energy efficiency through air sealing, adding insulation, more efficient lighting and HVAC equipment, and other measures. These may have a positive effect on value in this era of heightened awareness about energy use.
How the value of a remodeling project is perceived also depends on a variety of factors that traditionally affect home values, including the condition of the rest of the house, the value of comparable homes nearby, and the rate at which property values in the surrounding area are fluctuating. Comparable values are still affected by the presence of foreclosed properties, although this issue is diminishing in many markets.
The Cost vs. Value Report provides an accurate snapshot of the national housing market, but it cannot be applied accurately to an individual remodeling project for a particular home at a particular street address. Resale value is one factor among many that a homeowner must take into account when making the decision to remodel. At the local level, the best course of action is to obtain construction cost estimates from reputable local remodelers and to talk with an experienced Realtor about home prices in the neighborhood.