In a recent development, DFW Housing and Macroeconomics Analyst Amy Nixon has made a significant contribution to “Making Money” by offering her expert insights into the state of the U.S. housing market.
Newly unveiled survey data, courtesy of Realtor.com, presents a startling revelation amidst the backdrop of soaring home renovation costs. It discloses that an astounding 70% of homeowners in the United States are gearing up for extensive home improvements within the upcoming year. Furthermore, this survey brings to light that nearly three-quarters of these homeowners are eager to gain a more profound understanding of the potential Return on Investment (ROI) for their prospective home upgrades.
For those contemplating renovations, a valuable tool has emerged – Realtor.com’s renovation calculator. This innovative tool empowers homeowners to select a room, input project specifics, and receive an estimate of renovation expenses along with the anticipated increase in their home’s value. Additionally, a comprehensive report can be downloaded, offering a detailed breakdown of project costs, streamlining project management. Realtor.com’s RealValueTM tool leverages insights from Kukun, a residential data and analytics company, providing homeowners with tailored estimates enriched by comparative data that factors in the quality of renovations.
The survey further highlights the most common projects on homeowners’ radars in the coming 12 months, with bathrooms and kitchens both claiming 37% of the attention, closely followed by interior painting at 35%, and flooring replacement at 33%. Interestingly, the data underscores that 62% of homeowners would modify their renovation plans if equipped with a clearer understanding of which improvements would yield the highest value for their home’s resale price.
HVAC Conversion Tops ROI Charts
Realtor.com’s Clare Trapasso has identified the renovation project that offers the most promising ROI – an HVAC conversion, involving the replacement of an oil or gas boiler with an electric heat pump. According to Zonda’s 2023 Cost/Value report, which surveyed over 6,000 real estate agents, this HVAC project boasts an exceptional 103.5% ROI, closely followed by garage door replacement with a 102.7% ROI.
Notably, a minor kitchen renovation proves to be a wise investment, offering homeowners an impressive 85.7% ROI upon selling their homes. “A mid-range major kitchen renovation generated a 41.8% ROI, while a high-end major kitchen renovation generated a 31.7% ROI. A mid-range bathroom remodel generated a 66.7% ROI, while a high-end bathroom remodel generated a 31.7% ROI,” elucidates Trapasso.
The Significance of First Impressions
In today’s real estate landscape, first impressions wield immense influence over potential buyers. Trapasso emphasizes that many buyers are inclined to pass over an otherwise exceptional home if they are dissatisfied with the kitchen or if the property appears dated or requires extensive work. As Trapasso notes, “Buyers seek homes that are ready for immediate occupancy. With skyrocketing home prices and mortgage rates surpassing 7%, many prefer renovated homes over fixer-uppers. Perhaps they are unable to afford both a house and costly renovations at present.”
Renovation Timing Trends
Angie Hicks, Client Office Manager at ‘Angi and co-founder of Angie’s List, weighs in on the timing of renovation projects. Cosmetic improvements like painting a room, flooring replacement, front door updates, or living room transformations can be executed just prior to selling a home. However, larger-scale projects such as kitchen or bathroom renovations, deck additions, or basement finishing are more suited for homeowners who intend to stay in their homes for at least five years, thereby maximizing their returns when they eventually sell their properties.