Home Remodeling Falls – On average, U.S. homeowners who made home improvements in 2011 only picked up 58 cents in home equity on their remodeling dollar, according to the Cost versus Value survey. That’s a sharp fall from the 2005 peak, when a new project immediately earned back 76 percent of its cost in higher home prices.
Homeowners who do less costly replacement projects do slightly better at recouping their costs than do those who spend big bucks on additions and new construction, with projects like replacement roofs and front doors earning 64 percent of their costs back in resale value.
Remodeling projects earn back 57 percent, on average.
“The numbers are telling us that price is becoming a more and more important determining factor,” said Sal Alfano, editorial director for Remodeling Magazine. “People are doing the things they have to do, rather than the more discretionary projects.”
The average home improvement project cost $44,734 in 2011; that’s down slightly from the $45,593 figure for last year. But resale values fell more, producing a 3 percent decline in the cost-value ratio.
The good news for homeowners is that all of those projects continue to get more affordable, as contractors keep cutting their prices to stay busy during the ongoing housing slump.
“There is so little new construction,” Alfano said. “When commercial and new construction drop out of the picture, that leaves remodeling. The competition is there and they are sharpening their pencils.” Prices for materials have remained pretty constant, he said.
Alfano told Reuters that he thinks the slump in home remodeling might be bottoming out. “We think it might start to pick up at the end of 2012, and 2013 is where we are expecting a much stronger growth rate.”