While the overall changes since last year are modest, the 2019 Cost vs. Value report reflects the robust market that the remodeling industry has enjoyed over the past year. All projects covered in the report show an increase in value over the previous year, as reported by real-estate professionals in 136 metro areas. But costs have correspondingly increased—and in some cases, the increases are significant, likely due to tariffs that have roiled commodity markets. This has led to slight downturns in the percentage of costs recouped for a number of projects, but overall returns are up slightly compared to last year.

Noticeably, there has been a slight uptick in the year-over-year percentage change for upscale projects. While big-ticket discretionary remodeling projects tend to provide a lower rate of return than more modest replacement projects, year-over-year changes in the percentage of costs recouped from upscale projects have increased at a greater rate, suggesting that buyers of existing homes are willing to invest a little more for opulence these days. Value is fickle that way. In leaner times, buyers tend to become more frugal with their choices, opting to invest in more modest projects. A push of any sort towards extravagance is a strong sign of consumer confidence.

What's New for 2019

There are two new projects in this iteration of the Cost vs. Value report. The first new project is a roofing replacement job that adds standing-seam metal roofing. Compared with asphalt shingles, metal roofing costs significantly more but brings with it much greater durability. Even the fade- and chalk-resistance warranties on the finish of metal panels are typically triple the algae- and streak-resistance warranties on even high-end asphalt shingles.

The second project is a revamp of the universal design bathroom, which was first introduced to Cost vs. Value in 2017. Feedback from bath designers argued that the features included in a universal design bathroom tend to be favored in a more upscale market than the previous project description suggested. While the overall dimensions and accessible features of the current project are comparable, the finishes and mechanicals— including tiled walls and shower, humidity- controlled ventilation and radiant-heat floors—are more consistent with an upscale project than the previous specs allowed. With its higher price tag, however, accurate comparisons to previous years are not possible.

Think Like a Broker

As in years past, the national averages for exterior replacements outperformed those of larger discretionary remodeling projects. Garage door replacement is ranked first, continuing a two-year streak of returning on average nearly 100% of the project cost at resale. This top-value project is followed closely by the manufactured stone veneer project (adding stone to the lower third of a home front facade and extending it over the front entry), which averages a return of 95% of the cost at resale. Nine out of the top 10 high-return projects are exterior replacement projects. Only the minor kitchen remodel—a relatively modest indoor project among those covered—rivals the rate of return of most exterior projects.

The reason for high returns on exterior projects, and especially facade facelifts, stems from the valuations set by the real-estate community. In order to make the best use of the Cost vs. Value tool, a remodeler has to think like a real-estate broker. “Curb appeal” and “first impressions” are central to a real-estate professional’s estimation of resale value. Granted, a home’s exterior will only persuade potential buyers to see more, and first impressions can vary from one individual to the next. But the impact these impressions make is critical in setting the stage for what a buyer is willing to pay for a home.

The larger discretionary projects, such as kitchen, bath, and master-suite remodels, tend to be too individualized to provide broad, lasting appeal. There is no one best cabinet style or color, no perfect tile or fixture design, that garners universal affinity. Certainly, there are design trends that have wide appeal among a range of homeowners. But because of the vast differences in aesthetic tastes, one person’s elegant new kitchen or bath will be viewed by a range of other prospective buyers as tacky and outdated and in desperate need of a reset.

Given the wide variety of client tastes, and the remodeling industry’s immense capacity to service those diverse needs, remodelers understandably tend to be focused on a lot more than resale value when discussing a project. Pride in design and craftsmanship, long-term durability of materials, occupant health and safety, reductions in liability, and driving repeat business are all top of mind for remodelers, but they are not necessarily understood by clients. If you can adjust your focus to think like a broker first, you can dull clients’ No. 1 pain point, cost, with a discussion of the costs that can be recouped. Once that’s firmly established, and the clients feel reassured they are not throwing good money after bad, you can go on to show them how to think like a remodeler, raising their understanding and appreciation of the total value, not just resale value, of a home.

Investment Value Trends

While the percentage of costs recouped are trending downward for all of the replacement projects covered by Cost vs. Value, this change primarily reflects the sharp increase in material costs over the past summer. Material costs tend to comprise a greater proportion of replacement projects compared with larger indoor remodels, which have a higher percentage of labor costs. Provoked by trade tariffs and uncertainty that roiled commodity markets over the summer, lumberyards and supply houses began sending customers regular notices about cost increases, right when the cost evaluations for Cost vs. Value were being completed. The cost of the steel door replacement is the most dramatic example of this, with an increase of 24% year-over-year from 2018 to 2019. The percentage change in cost recouped—a decline of 16.4% year-over-year— looks startling, but the relatively low cost for this project means the change in cost in actual dollars—from an average of $1,471 to $1,826—is not nearly so heart stopping.

Similarly, costs for the wood deck addition rose about 15%, while the costs for the composite deck, manufactured stone veneer, and asphalt-shingle roof replacement projects all increased by 7% to 8%. But the high perceived values of these projects keep them at the top of the list for the national averages of cost-to-value.

In fact, despite the relatively high increase in cost for the composite deck project, at 17.8% it was one of the highest performing projects in the rate of year-over-year percentage change. Other projects with a high year-over-year increase in cost recouped include the backyard patio project (22%) and the major kitchen remodel (17%).

Regional and Metro Trends

Of the nine regions, four—Pacific, New England, West South Central, and East South Central—outperformed the national average of 68.3%, with the Pacific region leading the pack at nearly 10% above the national average. New England, at 71.8%, and the oil-rich and increasingly tech-savvy West South Central, at 69.2%, follow as the regions with the highest returns on remodeling real-estate investment.

While national and regional averages can give hints about growing markets and popular projects, the real beauty of the Cost vs. Value tool comes into play at the metro level, where remodeling jobs are actually sold and produced. In 2019, Cost vs. Value surveyed 136 metro markets for both cost and value data, up 36 locations over last year. Selects cities in each region to download metro-level data, which is available in PDF form, to share with customers as you explore with them the full value of their home.