Balancing need vs. want

According to the National Association of Realtors, existing home sales were up 9.1% in 2013 from where they were in 2012.

Home prices also increased 11.5% in 2013 from 2012 nationwide. The cost-value ratio of renovations increased 5.5 points in 2013 from the prior year. Similar to the median price for homes, the cost-value ratio for home improvements was the largest gain in eight years.

According to the annual Cost vs. Value Report, which was released in February, ranking the highest was a steel door entryway. Having the biggest gain in recovered costs was the addition of a generator.

Generators averaging $11,742 in cost increased 28% in estimated resale value and recovered approximately 68% of its cost in 2013. This increase is attributed to the storms and poor weather experienced across the country.

There were regional trends reported as well. Bridgeport ranked fifth in the nation for remodeling costs, bringing in 85.9% of renovation costs at resale. The New England region (which covers Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont) was the most improved region, moving from sixth to third in 2013 with an overall cost-value ratio of 74.6%.

The top 10 mid-range and upscale renovations from the 2013-14 Cost vs. Value Report were entry door replacement (steel), deck addition (wood), attic bedroom, garage door replacement, minor kitchen remodel, window replacement, siding replacement, basement remodel, and deck addition (composite).

The top 10 upscale projects were siding replacement (fiber-cement), garage door replacement, siding replacement (foam-backed vinyl), window replacement (wood), grand entrance (fiberglass), deck addition (composite), bathroom and major kitchen remodel, roof replacement, and bathroom addition.

Common to both lists above is replacing the front door, which on average adds 96.6% of the amount spent. The key is selecting the right style and finishes for a home. Replacing older elements of a home (i.e., doors, windows and siding) overall resulted in a better financial return than additions and other sizable renovations. Realtors will advise homeowners to update their kitchen and baths unless the entire home needs considerable work.

The recent cost vs. value report also revealed that kitchen projects yielded a higher return than bath projects with a minor kitchen remodel adding 82.7% of the project’s cost back to the home’s value.

The primary reason is that buyers typically overestimate how much it would cost to renovate a kitchen. If cabinet doors, appliances, countertops, and hardware were replaced in a kitchen, it would cost approximately $20,000. This would be considered a minor remodel.

Again, it is important to make renovations in keeping with the overall home and comparable homes with respect to style and cost.

Turning an attic into a bedroom ranked third among the 35 improvements in the report, returning 84.3% of the amount expended.

The size of a home’s septic system determines whether bedrooms may be added without expanding (if possible) or replacing the system.

Family rooms, kitchens and master suites are popular additions. However, getting a mortgage for a larger home may be easier than getting a home equity line of credit in an addition to a mortgage for an existing home. Homeowners need to evaluate their options for renovations after seeing what is possible financially, taking into account comparable properties as well as weighing what is needed versus wanted.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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