New year, new home renovations? Whether you're getting ready to transform your entire kitchen into a farmhouse-chic dream (hello, shiplap and apron sink!) or maybe just to add some new wood floor for the foyer, it pays to know what kind of return on investment your home renovation might deliver. According to Remodeling magazine's annual Cost vs. Value report, not all home remodeling projects deliver the same bang for the buck. Far from it, in fact.
So which projects give you the biggest return on investment these days? This year (like last), the No. 1 finisher was garage-door replacement. While not as fabulous as a full-kitchen remodel, this project essentially pays for itself, earning you a whopping 97.5% of your money back.
For this report, now in its 32nd year, researchers analyzed 22 popular home improvements in 136 markets nationwide. The magazine polled contractors on how much they charge for these jobs, as well as real estate agents on how much they think these features would boost a home's market price. They then used those figures to calculate what percentage of its cost each project might recoup—or not.
As it turns out, the price of a few key projects skyrocketed from the last year, while their value dropped, says Clayton DeKorne, chief editor of the JLC Group (which includes Remodeling magazine) and manager of the report. In other words, Americans might spend more on certain renovations and get back a lot less of the money they spent.
So what's going on?
According to DeKorne, President Donald Trump's new import tariffs on steel, lumber, and other building materials are destined to jack up renovation costs all round, leading to thinner margins on their return. Plus, as the housing market wobbles towards a peak in market prices, homeowners are less likely to renovate their homes, and real estate professionals predict that the renovation market will tighten.
"The economy is a little chaotic right now, and homeowners are holding their breath," says DeKorne. "People are very cautious to enter the market, which affects the willingness [of] people [to] pay for projects big and small."
Overall, the report found that in 2019, Americans should expect to make back 66.1% of the money they spend on renovations—a slight bump from last year's 65.8%.
And the report found that for some projects, the ROI is really worth it, especially those improvements that the whole neighborhood can see—in front of your house.
"The primary points of the evidence show us that curb appeal projects add to overall value of the house more than interior projects," DeKorne notes. "It's all about first impressions."
The chart below gives a full rundown of the top renovations, including how much they cost, their value at resale, and the percentage that can be recouped. After garage doors, the top finisher was manufactured stone veneer, with a 94.9% return on investment. Glamorous? No. Valuable? You bet.
A new project on the list this year speaks to another decidedly unsexy but invaluable trend: installing metal roofing. Compared with asphalt shingles, metal roofing costs significantly more, but offers much greater durability. And while metal roofs only yield a 60.9% ROI, DeKorne predicts their value will increase.
"This is the first year we've included metal roofing, and it's gotten a lot of interest," he says. "It's more expensive, but you'll get a better value over time than a common asphalt roof."
And if you're absolutely dying to renovate something indoors this year, DeKorne suggests keeping it in the kitchen. While most of the projects with the highest returns are exterior replacements, a minor kitchen repair cracks the top 10, with an 80.5% recoup.
"When buyers are looking at a house, they want to know the kitchen is something they can live with," says DeKorne.
A look at return on investment for popular home renovations.
If you’ve ever watched “The Price is Right,” you know that the only way to win is to be the one to correctly guess the price of the item you want without going over! That means your guess must be just slightly under the retail price.
In today’s shifting real estate market, where more inventory is coming to market and home values are projected to appreciate at lower rates, homeowners will not be able to price their homes as aggressively as they were able to just last year.
They will have to employ the same strategy: be the closest without going over!
As we have explained before, pricing your home at or slightly below market value actually increases the number of buyers who will see your home in their search!
Over the last six months, more inventory has come to market while the months’ supply of inventory available has dropped. This means that the demand for homes to buy is still very strong throughout the country!
Homeowners who make the mistake of overpricing their homes will eventually have to drop the price. This leaves buyers wondering if the price drop was caused by something wrong with the homes when in reality nothing was wrong, the price was just too high!
Finally, you've done it: You've scoured the market for available homes—and then some—and found one you can't stop thinking about. It's time to make an offer!
But before you put your money on the line, take a peek around the neighborhood. We won't use a certain cliché, but there is a reason the pros emphasize location when buying real estate. You can change your house—but you can't change the neighborhood. And if your hood is on the decline, you just might have a helluva time offloading your home when you decide to sell.
A bad neighborhood isn't always obvious, though; sometimes you need to do a little digging to know if a community is worth buying in. Luckily, we've identified seven red flags that should give you pause before you sign on the dotted line.
Red flag No.1: Too many houses are on the market
There's nothing wrong with two or three listed houses on the same street. But if you see an army of "For Sale" signs, consider looking elsewhere.
"This points to illiquidity in the market and pricing pressure, which is a risk for buyers," says Alison Bernstein, the founder of Suburban Jungle, which helps families find their ideal suburb.
Of course, the hue of this particular red flag depends on the reason for those "For Sale" signs. Perhaps the neighborhood is rapidly gentrifying and longtime residents have decided to cash in. Or maybe there's a more sinister explanation, like increasing crime rates. Your agent can help you assess the situation before making any big moves.
Red flag No.2: The schools are enrolling fewer students
Schools in healthy communities should be steadily increasing their enrollment—or at least keeping the population steady, if there's no physical room to grow.
"Shrinking class sizes are a red flag," Bernstein says.
There are a number of reasons enrollment might decrease. Your local school might have a reputation for poor management, sending parents fleeing to charter or private options. Or perhaps residents are staying put as their kids grow up, leading to older neighbors and fewer close-by pals for your kids. That may or may not be a deal breaker, but it's certainly something to consider.
Red flag No.3: The area leans industrial
A nearby strip of cute boutique stores might be a nice selling point, but reconsider the purchase if the closest commercial influences lean toward the industrial.
"Be mindful of any kind of commercial influence on the block, such as close gas stations or anything that could be undesirable health-wise," says Ralph DiBugnara, the vice president at Residential Home Funding.
Any nearby industrial plants should automatically nix a neighborhood, and think long and hard before buying across from a car dealership or auto body shop, which attract a lot of car traffic.
Red flag No.4: There are lots of empty storefronts
Don't just stop at counting boutiques versus gas stations. Are the stores actually thriving, or are there lots of retail spaces for rent?
"Empty storefronts can tell you a lot," Bernstein says. "They point to less disposable income of residents than clearly there once was."
Why does that matter? Decreased disposable income indicates a neighborhood on the decline. If homeowners don't have money for dinner out, they probably don't have cash for upkeep. Shabby homes drag down property values. Meager cash flow can also lead to future foreclosures—and a foreclosed-upon home is a neighbor that no one wants.
Red flag No. 5: The Stepford style is in full force
You might love the homogenous, well-groomed suburban look (and there's nothing wrong with that!). But take a moment to examine it more closely. Are there any unique decorative doodads dotting each garden, like aluminum chickens or wind chimes? Or is the front porch furniture identical?
If all the neighborhood's homes (and landscaping) look suspiciously similar, "explore how restrictive the homeowners association is," says Susanna Haynie, a Realtor in Colorado Springs, Co. "It could be an issue."
Red flag No.6: There's no parking
Sure, the property may have a one-car garage—but where will your friends park, and where can you keep your spouse's car? If the streets have bumper-to-bumper traffic, think twice about buying in the neighborhood—especially if the home lacks a garage or carport.
"I'm always on the lookout for a lack of parking," DiBugnara say. "It's best to visit at night or on weekends to really, truly tell what will be available to you once you live there."
Unless you commute primarily by foot or bike—or you're OK spending your weekends circling the block—the neighborhood may not be a good fit for you.
Red flag No.7: Surrounding homes aren't well-maintained
Tread lightly here: A street full of run-down homes with overgrown yards and broken fences should set off warning signals. And this has nothing to do with wealth; lower-income neighborhoods can be just as well-kept as more expensive ones. It's about pride. Neighbors with no pride in their home's appearance and upkeep decrease property values for everyone.
Plus, problems with the homes next door can indicate that the house you want might have bigger issues than meet the eye. Look at every house on the block for issues such as water pooling in the yards, or flickering porch lights.
"If there are problems such as water pipes or electrical issues, you will tend to see more than one home showing damage," DiBugnara says. Fixing these major problems "could be a major expense, hassle, or detriment to your value later on."