If you believe the numbers, equity-conscious homeowners have just gotten some sobering news: While home values have appreciated by an average 4 percent to 8 percent in many markets this year, the return on investment produced by major remodeling projects reportedly has dropped, precipitously in some areas.

But don't panic. Read on.

According to the newly published 1999 home real estate study, "Cost vs. Value," an influential annual report conducted by Remodeling magazine and cited by home improvement contractors and realty agents to clients nationwide, the immediate resale value added by a typical "major kitchen remodel" project has dropped from last year's 87 percent of its cost outlay to 70 percent this year.

In other words, if you spent thousands of dollars to redo your kitchen in 1998, you would have recouped an immediate 87 percent of that expense via resale value added to your house. This year, the same project--described by the study as an "update" of an "outmoded 200 square-foot kitchen with new cabinets, laminate counter tops, mid-priced sink and faucet, energy-efficient wall oven, cook-top, ventilation system, built-in microwave, dishwasher, garbage disposal unit, and custom lighting"--would only bring you back 70 percent back immediately.

In a handful of metropolitan areas, the change in the return-on-investment calculus was far more dramatic: In Washington, according to a comparison of data from the 1998 study with the 1999 version, the typical major kitchen remodeling cost $23,816 last year but returned $25,000 to the home's resale value--105 percent of the cost. In 1999, by contrast, the identical job cost $29,225, but returned only $15,304 in immediate resale value--just 52 percent.

The worst statistical decrease of all was in Cleveland, where the identical kitchen remodeling added 99 percent of its cost to the resale value of the house in 1998, but a paltry 29 percent in 1999.

What's going on here? Are major kitchen remodelings no longer returning much of what homeowners sink into them?

If that's the case, the same is apparently true for bathroom additions (down from an average 89 percent return on investment in the 1998 study to 72 percent in 1999), family-room additions (down from 84 percent to 71 percent), two-story additions (down from 84 percent to 62 percent), master suites (down from 82 percent to 68 percent), bathroom remodelings (down from 73 percent to 71 percent), deck additions (down from 70 percent to 54 percent), home office remodelings (down from 64 percent to 50 percent), and attic-to-bedroom conversions (down from 83 percent to 65 percent).

The latest Remodeling "Cost vs. Value" report was co-published with the National Association of Realtors' monthly publication Realtor for its 725,000 member agents and brokers. It is based on cost-to-value-added estimates provided by dozens of real estate agents and a sprinkling of appraisers, in 60 U.S. housing markets.

The annual Remodeling study has been controversial because its return-on-investment estimates have been so high, and because its methodology is unscientific. Rather than attempting to measure actual changes in resale values, based on a sample of recorded sales transactions involving remodeling projects, the study has relied heavily on speculative "estimates" by agents, some of whom are in the business of selling homes for rehabilitation.

After last year's criticism, including by this column, the National Association of Realtors said it would improve the methodology of the annual study by including appraisers in the group of estimators. That was done, according to association research director Fred Flick. But the bulk of participants in the study continue to be real estate agents.

Flick, in comments published with this year's study, says the addition of appraisers "improved the quality of the estimates," but also lowered the return-on-investment values, "since appraisers tend to take the long view of remodeling projects." That is the official explanation for the year-to-year plunge in returns on investment in the middle of a fast-appreciating real estate market.

The new study, as published by Realtor, does not reprint last year's data, nor does it attempt to explain how a renovation project that returned 99 percent just a year ago could conceivably return just 29 percent this year.

The bottom line here: When a contractor or realty agent hands you impressive-looking statistical tables purporting to show how much you'll gain by undertaking a specific remodeling project, be skeptical. Ask how the data were compiled. And talk to a variety of professionals--appraisers, remodelers, realty agents and fellow homeowners--before you invest.