How to Increase Home Value in 2021
People often fantasize about finding their “forever home,” but what they should be daydreaming about is ways to increase home value — particularly those with a high return on investment (ROI). A National Association of Realtors study showed that the median time span between a home purchase and a home sale was around 9 years — far short of “forever.”
How you approach a remodel or renovation depends on your long-term goals — do you plan on sticking around a while (5 years or more), or is your current residence just a stop along the way? It doesn’t make sense to delve into a highly involved, low-ROI project if you won’t be around to enjoy the fruits of that labor (and recoup those costs yourself). Conversely, a simpler, high ROI project will yield greater dividends over a shorter period of time — consistent with a seller’s mentality.
The Cost vs. Value Report for Home Remodeling Projects
So what are the best ways to increase home value then? The answer can vary from year to year and region to region, which can make it hard to know where to start. Thankfully, the Cost vs. Value report published annually by Remodeling magazine helps keep things straight. The report compares the average cost of 22 popular remodeling projects with the value they retain at resale across 101 U.S. markets — in our case the Middle Atlantic and more specifically Philadelphia (right across the Delaware River).
Compared to 2019, the costs of nearly all project types went up while the perceived value dipped. It’s important to note, however, that there are many factors that figure into the numbers — such as the condition of the rest of the house wherein the project is taking place, the economic health of the surrounding region and home values within the neighborhood, and the fact that many projects come with some sort of tradeoff. A solution you’re creating for yourself may actually be problematic for a prospective buyer.
For instance, say you absorb the walk-in closet or spare bedroom beside your master bedroom to create a luxury master bath. Yes, certain buyers may appreciate the beauty and indulgence of that reimagined space, but the loss of an additional bedroom may be a dealbreaker for buyers with growing families. This is why we see such variances from region to region (e.g. a population heavy with single young professionals vs. families)
Three popular remodeling projects (and their ROIs)
In South Jersey and across America, kitchen and bathroom remodeling projects were among the most coveted in 2020. Home Advisor’s annual State of Home Spending Report polled 5,000 Americans about their home improvement spending habits, and kitchens (22.6% of respondents) and bathrooms (30.9%) both ranked within the top 5 most popular. On average, people spent $745 more than the previous year on home improvement — a byproduct of higher prices and a lot more time spent at home due to the pandemic. All that stress had some Ayars customers wanting to retreat into a beautifully appointed new master suite.
Kitchen remodeling projects
Midrange minor kitchen remodel
The midrange minor kitchen remodel mentioned in the Cost vs. Value Report assumes a “functional but dated 200-square-foot kitchen,” the project calls for replacing cabinet fronts with shaker-style wood panels and drawer fronts with new hardware, as well as upgrading the range and refrigerator with new energy-efficient models. Laminate countertops, sink, faucet, and flooring all receive mid-priced replacements. The walls, trim, and ceilings get a new coat of paint.
Major kitchen remodels
A midrange major kitchen remodel takes all that but ups the ante with a more functional layout, including 30 linear feet of semi-custom wood cabinets and a 3×5 foot island. An upscale major kitchen remodel spares no expense: fully customized cabinets, stone countertops, imported tile backsplash, commercial-grade cooktop and wall oven, designer faucets and filtration system, upgraded general and task lighting.
Return on investment
The midrange minor kitchen remodel had the highest ROI, with 73.2% of costs recouped at resale. The midrange major kitchen remodel still saw South Jersey homeowners recover over half (54.0%) of their investment, while the upscale remodel yielded the lowest return of the three.
Bathroom projects
Bathroom remodels
The Cost vs. Value Report bases its midrange bath remodel (5×7 bathroom) on updates to all fixtures with quality but affordable materials (porcelain-on-steel tub, ceramic tile surround, solid surface vanity top), with features you’d expect in a modern bathroom (single-lever temperature and pressure control in the shower). Its upscale bath remodel template greatly builds on that, not only in size (100 sq. ft. vs. 35 sq. ft.) but in luxuries (recessed shower caddy, body sprayers, freestanding soaker tub, electric in-floor heating, etc.).
Additional bathrooms
The Cost vs. Value Report’s baseline bathroom addition projects call for very similar features and functionality as the remodeling projects mentioned above, but with the added preliminary steps of framing walls and extending HVAC, wiring, and plumbing.
Return on investment
Generally speaking, bathroom projects had some of the lower ROIs listed in this year’s Cost vs. Value report, with remodels (45.1% to 54.9%) faring better than additions (41.9% to 43.1%) — running new plumbing and wiring is not a cheap date. That said, an extra half bath adds about 10% to a home’s value, while converting a half bath to a full bath adds about 9%. By extension, a brand new full bath would increase home value by 19% (National Association of Home Builders).
Master suite additions
Midrange
The midrange master suite addition involves 24’x16’ of new space, with a carpeted master bathroom with a walk-in closet and dressing area, and a master bathroom with a double-bowl vanity (his and hers), freestanding soaker tub, and 3’x4’ ceramic tile shower
Upscale
The upscale master bedroom suite addition is an even classier affair, with 32’x20’ of additional space with a lounge area, custom millwork, a high-end gas fireplace with a stone hearth, fully functional wet bar, custom lighting controls, master bathroom with a dual shower, freestanding tub, and separate custom vanities, and a whole lot more.
Return on investment
A new master suite is worth the investment if you’re looking to spoil/pamper yourself for years to come, but maybe not so much if you’re on your way out. The midrange project had an ROI of 44.1%, while the upscale project had an ROI of 37.3%.
High ROI vs. Low ROI remodeling projects
The top 5 ROI remodeling projects in South Jersey (i.e. Philadelphia area) favored exterior home improvements: manufactured stone veneers (94.1%), garage door replacement (70.0%), wooden deck addition (66.6%), and vinyl siding replacement (64.0%); midrange minor kitchen remodel (73.2%) ranked second.
Across the board, more “luxury” and “upscale” remodeling and renovations projects tended to not increase home value as much as one might hope. So is it worth it to add an upscale bathroom, totally reimagine a kitchen with state-of-the-art features and materials, or build on a gorgeous new master suite?
Again, it depends on your long-term plans and your willingness to spend. If you’re ready to settle down and have the budget, there’s no question that significantly upgrading and beautifying your home will seriously enhance your enjoyment of the space, and in turn, your quality of life. If you’re planning on selling soon, think more surface level. But if you’re planning on staying for the long haul, think deeper about what you want and what would make you happy.
