How Remodeling Impacts Home Values
With the current pace of home price appreciation and limited housing inventory, some homeowners are choosing to remodel and renovate their current homes instead of moving. Many homeowners choose to remodel under the pretense that their improvements will increase the resale value of their home. While this is true to an extent, certain types of renovations have greater impact on home values than others.
Harvard’s Joint Center for Housing Studies expects remodeling spending to reach $340 billion in 2018, up 7.5% year-over-year. Some of these gains will be led by homes impacted by the record number of natural disasters this year including fires in California and hurricanes across the Southeast. According to Remodeling magazine, homeowners choosing to perform high-end interior remodels will see less of a return on investment than those who perform exterior practical remodels.
Homeowners who remodel will see the average payback in the home’s resale value increase 56% of the cost of the remodel. Homeowners who improve their homes with new garage doors or windows, will see the payback higher than 75% of the cost of the remodel. Some of the most profitable exterior changes include garage door replacement, wood deck additions, and manufactured stone veneer installations.
Minor kitchen remodels like updating appliances can earn an 81% return, while major high-end kitchen remodels will yield just 59%. While everyone’s design taste may not be the same, almost everyone will appreciate new appliances and fixtures that are energy efficient or improve functionality.
Before undertaking any remodeling projects, it is best to consult a real estate professional. Loans like renovation loans make it possible for homeowners or home buyers to refinance or purchase a home and pay for needed repairs or renovations through one monthly mortgage payment.