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Is your remodel worth the investment?
Improvement costs are outstripping the boost to a home’s sale price

If you’re hoping to boost the resale value of your home by adding a bathroom or a deck, you’re likely to recoup less of the cost of the project today than you would have a few years ago, says the 2006 “Cost vs. Value Report” from Remodeling magazine.

You’ll make back about 70 to 85 cents of every dollar you spend, depending on the type of project you undertake and where you live, according to the 19th installment of this annual report. During the recent housing boom, homeowners who improved their properties and sold them within a year of project completion recouped an average of nearly 90 cents per dollar. But while costs of improvements have gradually risen from peak 2003 levels, the degree to which those costs raise the price of a given home (if sold within a year after the improvement) has been slower to rise. See the chart below for a breakdown of projects that have seen the most dramatic drop in amount recouped and those that have changed the least from 2003 to 2006.

The Remodeling report tracks cost-to-construct estimates in 60 metropolitan areas for 25 projects at the midrange and upscale levels. The resale-value figures in the survey are determined by a poll of more than 2,000 members of the National Association of Realtors. Use the report as a rough gauge of what you might receive in recouped value for a project at your home. A number of variables determine return on investment, such as the condition of your home, the value of similar homes nearby, and property values in your market. Also keep in mind that our analysis of past reports from Remodeling by independent appraisers found the magazine’s estimates to be overly optimistic.

If you’re planning a remodel, be sure to read “Remodeling: Secrets of success.”  The article describes in detail what homeowners who did major renovations would do differently and what worked well for them. And to keep your dream project from becoming a financial nightmare, heed the expert advice in “Remodeling: Don’t get burned on financing.” (Both articles are available to ConsumerReports.org subscribers.)


When projects don’t pay


 
Job Cost
Project Value at Resale
Percent of Cost Recouped
Project
2006
2003
% change
2006
2003
% change
2006
2003
% change
Add deck
14,728
6,304
+134
11,307
6,661
+70
76.8
104.2
-26
Add bathroom (midrange)
$28,918
$15,519
+86
$21,670
$15,418
+41
74.9
95.0
-21
Add family room
74,890
53,983
+39
53,519
43,931
+22
71.5
80.6
-11
Add master suite (midrange)
94,331
70,760
+33
68,458
54,376
+26
72.6
76.4
-5
Remodel basement (midrange)
56,724
43,865
+29
44,685
34,801
+28
78.8
79.3
-1
Replace wood windows (midrange)
11,040
9,568
+15
9,416
8,673
+9
85.3
84.8
+1



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