Remodeling: How to get the most bang for the buck

May 9, 2013

Arlington resident Janet O’Grady recently had the front walkway and porch steps replaced on the rambler she’s owned for 30 years. She also had her kitchen painted.

Now she’s planning to upgrade her countertops to granite.

“Eventually, I’ll sell, but I wanted to do the work when I could enjoy it,” she said. “Now I’ve got this fabulous front walkway and it opens up the world,” she added.

She’s in good company.

As the housing market recovers, spending on remodeling is rising. Whether to increase resale value or to simply make their surroundings more contemporary, homeowners spent 9 percent more on renovations in 2012 than the previous year, according to an April study by the Joint Center for Housing Studies at Harvard University.

Renovation spending is expected to increase again this year, the study says.

The top improvements homeowners make, according to the latest American Housing Survey, are upgrading appliances and major equipment as well as flooring, paneling, ceilings, windows and doors. Garages, at a median price of $15,000, are the most expensive project. Kitchen remodeling, at a median price of $5,000, is the next most expensive one, followed by roofing, at a median cost of $4,559.

Growth in remodeling is fueled by several factors, experts say.

Rising home equity has given owners incentive to resume spending on improving their properties.

Underwater homeowners, who’d like to sell but can’t, are instead upgrading. Many who aren’t underwater, drawn by the sellers’ market, are investing in renovations that can help them get top dollar once they list.

The investors and traditional buyers who’ve flooded the market recently are spending heavily to renovate their new properties.

And elderly people are putting money into wider doorways, ramps, elevators and easily accessible showers so that they can remain independent in their homes as they age.

Still, many homeowners who want to increase resale value when they list may feel clueless in determining what projects will yield the best return. Is it best to do a full-scale kitchen and bathroom remodel, or will some paint here and there do?

If you’re looking for the greatest return on investment, start at your front door. According to Hanley Wood, a Washington-based publishing and information firm that focuses on housing construction issues, a steel entry-door replacement job will cost an average of $1,207 in this region, work that will yield about 98 percent in resale value.

Vinyl siding replacement averages about $12,007 and yields about an 84 percent return. And adding a wooden deck is also a good investment: Costing an average of $10,696, it returns about 91 percent at resale.

The projects that recover less are sunroom additions, 58 percent; bathroom additions, 53 percent; and home office remodels, 44 percent.

Such information may be useful to determine which option is best. For instance, homeowners who install steel entry doors may pay less and recoup more. A fiberglass door recoups 66 percent of its $3,481 cost, according to the Hanley Wood study, compared with the 98 percent recovery of the $1,207 cost for steel doors.

A major kitchen remodeling recoups 72.5 percent of its cost, compared with 85 percent for a minor one.

A wood deck addition recoups 91 percent of its $10,696 cost, compared with a composite deck, which returns 79 percent of its $15,701 cost.

The results reflect “what real estate agents are seeing,” said Jonathan Smoke, chief economist for Hanley Wood.

“These numbers are useful to help you understand what you’re spending and to help [homeowners] set priorities,” he added. “But most people improve [their homes based on their lifestyle needs], and they do not focus on resale.”

Clearly, it’s not necessary to spend a ton of money on a remodeling job if the owner is willing to put in a little work. About 37 percent of these projects are done by the homeowners instead of professionals, according to the American Housing Survey issued by the U.S. Census Bureau and the Department of Housing and Urban Development.

Sometimes the work is a hybrid of professional and do-it-yourself work. Homeowners Luke and Juliet Armerding decided to gut and remodel two bedrooms in their 1890 four-bedroom, two-bath Mount Vernon Square townhouse. The work was “a combination of hiring folks and my own blood, sweat and tears,” said Luke Armerding. “It was livable, but it was pretty ugly,” he said.

While the temptation was strong to hire someone to do the whole job, “I wanted to learn how to do this myself,” said Luke Armerding. However, he didn’t want to have to learn the more “specialized aspects,” such as electrical work. By doing all of the demolition and drywall himself, he kept the cost of both projects under $7,500.

“Anyone can demo. You just have to learn,” he said. He also installed batt insulation and leveled the ceiling by sistering new joists. He and his wife hired professionals to do the framing and electrical work and lay the hardwood flooring.

Doing your own renovation work — even if you hire professionals for part of it — requires patience.

“It took Luke roughly seven months to complete the work, due to having limited free time after work and needing help from friends to do some of the work such as hanging the ceiling joists,” said Juliet Armerding. She added that they haven’t renovated the kitchen yet because they are planning to rent their house when they move within the next few years. “If we were looking to sell, we’d definitely renovate the kitchen,” said Juliet Armerding.

If you are hiring a contractor, it’s important to make sure he or she is licensed in your jurisdiction, is following code and is obtaining the necessary permits required to do the work.

The American Housing Survey found that, from 2009 to 2011, owners spent a median of $3,200 on home repairs. Other studies show this number increasing — welcome news to the remodeling industry after a long downturn. During the recession, home building and improvement spending plunged to 2.8 percent of gross domestic product from 5.2 percent before the downturn.

“The Washington area is a little bit insulated, but remodeling took a huge hit” in terms of dollars and the number of jobs, said Joe Normandy, executive director of the National Association of the Remodeling Industry’s metropolitan Washington chapter. The overall number of projects declined, and the projects decreased in scope, he said. Remodeling companies suffered. “We saw members with a staff of 18 go down to two,” he said.

Now the industry is surging as people are either opting to renovate homes they have just bought or to remodel their old homes instead of moving.

“The Washington market had a good year, ahead of the increase we saw nationally as demand improved from the local economy remaining strong and from home sales and home prices starting to recover as well,” said Smoke of Hanley Wood.

That’s true for Greg Wasson, owner of D.C.-based Restoration Painting Company. “I have definitely been busier over the past year as people have turned to remodeling or smaller home repair projects instead of selling or buying,” he said.

One demographic represented well in the renovation surge is elderly people.“We are seeing larger shares of projects completed by active adults — those in or nearing retirement. These folks have postponed projects as they weathered the economic storm, but now are deciding to upgrade their homes as they think about retirement,” Smoke said.

Timing was everything to O’Grady, who owns the rambler in Arlington. The last time she did any major renovations was in the early 2000s when she remodeled her kitchen and built an addition to her house.

“I waited for the time I could do this without a loan. I’m in my 50s, so I’m looking to reduce my debt,” she said.

Susan Straight is a freelance writer.

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