Cost vs. Value: The Home Improvement Projects With the Highest ROI in 2018

Posted on Jan 17 2018 - 4:35pm by Jameson Doris
#6

cost vs. valueA strong housing market isn't necessarily all good news for sellers. As evidenced by Remodeling magazine's newly-released Cost vs. Value Report for 2018, average return on investment (ROI) for home improvement projects dipped across the board, with "upscale" projects taking the biggest hit.

The report, which measures the average cost of 21 popular remodeling projects and their average resale value one year later, found that garage door replacement has the highest ROI at 98.3 percent (up from 85 percent year-over-year). Backyard patio jobs garner the lowest ROI, at 47.6 percent (down from 54.9 percent year-over-year).

The reason for the sweeping decrease in ROI isn't immediately obvious, but Remodeling magazine's editor-in-chief (and manager of the report) Craig Webb notes that it's likely related to the strength of the housing market currently.

"It's not clear if...nationwide affordability concerns are leading (real estate) pros to question the value of renovations that would make a house even more expensive at resale," says Webb.

However, a silver lining from the report relates to when the data was compiled. Remodeling magazine put all the cost information together before the country was struck with several natural disasters, including massive forest fires and several hurricanes. Since then, building supplies and the price of skilled labor has increased, but that's expected to change over the course of 2018. As a result, expect to see the ROI of most of these projects level out by the end of the year.

Despite these events, some longtime trends continued through the new year. Remodeling is still far more cost-effective than replacement, but, according to real estate pros, replacing is still the way to go. This year, there's a 20-point difference in ROI: 76.1 percent for replacement jobs, versus 56 percent for remodeling.

Nationally, when it comes to renovation ROI, curb appeal still wins out. Here are the top five projects with the greatest ROI in the report's "midrange" cost category:

Manufactured Stone Veneer (97.1% ROI)

  • Average Cost: $8,221
  • Average Resale Value: $7,986

Entry Door Replacement (Steel) (91.3% ROI)

  • Average Cost: $1,471
  • Average Resale Value: $1,344

Deck Addition (Wood) (82.8% ROI)

  • Average Cost: $10,950
  • Average Resale Value: $9,065

Minor Kitchen Remodel (81.1% ROI)

  • Average Cost: $21,198
  • Average Resale Value: $17,193

Siding Replacement (76.7% ROI)

  • Average Cost: $15,072
  • Average Resale Value: $11,554

The top five projects with the greatest ROI in the report's "upscale" cost category are:

Garage Door Replacement (98.3% ROI)

  • Average Cost: $3,470
  • Average Resale Value: $3,411

Window Replacement (Vinyl) (74.3% ROI)

  • Average Cost: $15,955
  • Average Resale Value: $11,855

Window Replacement (Wood) (69.5% ROI)

  • Average Cost: $19,391
  • Average Resale Value: $13,468

Grand Entrance (Fiberglass) (67.6% ROI)

  • Average Cost: $8,591
  • Average Resale Value: $5,809

Bathroom Remodel (56.2% ROI)

  • Average Cost: $61,662
  • Average Resale Value: $34,633

Nationally—and on the complete other end of the spectrum—here are the five projects with the lowest ROI in the "midrange" cost category:

Backyard Patio (47.6% ROI)

  • Average Cost: $54,130
  • Average Resale Value: $25,769

Master Suite Addition (56.6% ROI)

  • Average Cost: $123,420
  • Average Resale Value: $69,807

Major Kitchen Remodel (59% ROI)

  • Average Cost: $63,829
  • Average Resale Value: $37,637

Bathroom Addition (59.9% ROI)

  • Average Cost: $44,717
  • Average Resale Value: $26,769

Deck Addition (Composite) (63.6% ROI)

  • Average Cost: $17,668
  • Average Resale Value: $11,239

The five projects with the lowest ROI in the "upscale" cost category are:

Master Suite Addition (48.3% ROI)

  • Average Cost: $256,229
  • Average Resale Value: $123,797

Major Kitchen Remodel (53.5% ROI)

  • Average Cost: $125,721
  • Average Resale Value: $67,212

Bathroom Addition (54.6% ROI)

  • Average Cost: $83,869
  • Average Resale Value: $45,752

Bathroom Remodel (56.2% ROI)

  • Average Cost: $61,662
  • Average Resale Value: $34,633

Grand Entrance (Fiberglass) (67.6% ROI)

  • Average Cost: $8,591
  • Average Resale Value: $5,809

The 2018 Cost vs. Value Report compares, across 149 markets, the average cost of 21 popular remodeling projects with their average value at resale one year later. Average resale value is calculated based on estimates provided by real estate professionals. View the full report, including project descriptions and city-level data, here.

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6 Comments so far. Feel free to join this conversation.

  1. Sherry Anderson January 18, 2018 at 9:57 pm - Reply

    Richard’s comment is the best – it’s not so much about how much the return is, as that it’ss often difficult if not impossible to measure. It’s about getting the home sold. What’s the value of sold vs not sold? Or sold in a week vs sold after months on the market? That’s the way to approach remodeling and projects, especially before putting the home on the market. Usually if the remodel is needed for the home to compete with other homes in the price range or neighborhood – it pays to do it, unless we’re talking about a home that hasn’t been updated in so long, it needs everything. That would be a home for a professional remodeler to purchase and falls into a different category. The others, if the remodel or updating is needed, it would deter many buyers. Most people don’t have the time or extra money for it, and they will often overestimate the cost to have it done after closing, so they move on.

  2. Sheila Kraemer January 20, 2018 at 6:52 am - Reply

    On the bottom end of your scale, (those with lowest ROI,) I can sell you homes in my area for less than the cost of those projects! The estimates are outrageous! I’ve had flippers buy homes needing updating for less than $50,000, do a complete remodel – kitchen, bathroom, new flooring, even new appliances, and be able to make a profit selling in the $100,000 range, after expenses including realtor fees on both the purchase and sale end.. If people in less than highest upscale homes are paying that much (and I’m referring to the first list,with lowest ROI, not the upscale remodel list) it’s no wonder ROI is so low. People need to pay attention to market values in their areas before over-improving their homes. Or find less expensive contractors!

  3. Debbie Russell January 21, 2018 at 8:45 pm - Reply

    Leaving comment ONLY so that I might see other comments. I shared this article on NextDoor; someone is claiming that other Realtors have left comments. Not seeing them – so here we go. Maybe I will now – it’s a free ride after all.

  4. Monika Edwards Harrison, Realtor January 23, 2018 at 4:47 pm - Reply

    The takeaway from this article is the same as every other subject in real estate. There are no absolutes that are true in every State, every neighborhood or with every home. Each sale is unique and reflects the moment in time in which it is occurring, the neighborhood, the overall economy and, specifically, the local economy. Others have commented that these numbers are high; they are in many parts of the country but they may not be in areas where the overall cost of real estate is very high and the discretionary income and remodeling goals of remodelers is also high. What’s most important is that it is rare to get every dollar of any remodel or improvement back but, because of local market conditions, sometimes even the smallest improvement can have a positive effect on the sale by making the home more attractive to a larger number of potential buyers. Nothing about real estate is cookie cutter or universally true except that honesty is the best policy, pricing right is essential and good presentation leads to a faster and higher priced sale!

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  6. Ben Huynh February 11, 2018 at 12:05 pm - Reply

    Great informative!

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