Major Home Remodeling Not Paying Off, Report Finds

Homeowners who want the biggest bang for their remodeling buck might want to forget full-blown room remodels and opt for more practical replacement projects that reduce home-maintenance needs, increase energy efficiency or improve curb appeal, according to a recent report.

The latest version of Remodeling magazine's annual Cost vs. Value Report found that seven out of the top 11 projects that paid off the most at resale were replacement projects, said Sal Alfano, editorial director for the magazine. That includes window and siding replacements.

Also, minor remodels are paying off more than expansive room improvements, according to the 2007 report.

The report compares construction costs for common remodeling projects against the share of those costs recovered at resale, with projects broken down into "midrange" and "upscale" categories. National, regional and city data can be viewed at the magazine's Web site, http://costvalue.remodelingmagazine.com.

This year, returns on remodeling projects are looking more modest than in years when the remodeling market was "white hot," Alfano said.

"The way I see it, we're getting back to normal here," he said.

From 2004 through 2006, some projects paid returns between 90 percent and 100 percent of their costs -- and sometimes even more, prompting some improvements to be worth more at resale than the homeowner actually paid, he said. That was due to a rapid appreciation of housing prices as demand for housing was strong.

It was common to hear stories of people doing substantial improvements merely for the payoff at resale, said Kermit Baker, director of the Remodeling Futures Program at Harvard University's Joint Center for Housing Studies.

Today, however, there's been a shift to "do the things that make sense," Baker said.

Projects that are paying off the most include:

¿ A midrange wood window replacement, which recovers an average 81.2 percent of the cost at resale;