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Major Home Remodeling Not Paying Off, Report Finds
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¿ A midrange siding replacement, recovering 83.2 percent of the cost at resale;
¿ An upscale fiber-cement siding replacement, recovering 88.1 percent of its cost.
In contrast, homeowners recover on average 57 percent of a midrange home-office remodel and 59.1 percent of a midrange sunroom addition upon the sale of the home.
Scaled-back improvements also pay off: A midrange major kitchen remodel will recover 78.1 percent of its cost, but a minor kitchen remodel will recover 83 percent, according to the report. An upscale major kitchen remodel pays back 74.1 percent at resale.
The Cost vs. Value Report isn't the only evidence of a changing remodeling market.
Spending on home-improvement projects is on track to decline for the first time since late 2003, according to the Joint Center for Housing Studies. Overall, remodeling spending in 2007 is projected to be 2.3 percent lower than 2006. Remodeling probably won't turn around until new-home building hits bottom, Baker said.
One reason for the slowdown: It's harder for people to finance improvements, due to tougher loan underwriting, Baker said. Two years ago, people were accustomed to receiving a stream of unsolicited offers to tap their home equity, he said. Now those offers are less common.
But some borrowers are enjoying lower rates on home-equity lines of credit, and home equity prices generally are moving downward, said Keith Gumbinger, vice president of HSH Associates, a publisher of mortgage information.
Still, for many, there is a reluctance to invest in improvements as homeowners fret about declining home prices, Baker said. Until they have a sense of when the market will return to health, they're often nervous about taking on new projects.
That's not to say resale value is at the top of the list of reasons people remodel, Alfano said.
