If nothing else, a recent Remodeling magazine survey of home-improvement projects and their value at resale time offers substantial proof that the costs of such work have risen sharply over the last five years.
An example: A Philadelphia homeowner who paid a contractor to make a few changes to the kitchen spent an average of $9,867 in 1999. In 1994 the same job cost $6,546, an increase of 50 percent.
The specs of the job were the same: In a functional but dated 200-square-foot kitchen with 30 linear feet of cabinetry and countertops, refinish cabinets and add new raised-panel wood doors; install energy-efficient wall oven and cooktop, laminate countertops, mid-priced sink and faucet, wall covering and resilient flooring; and repaint.
A major kitchen remodeling--throwing out what you have and starting from scratch--costs 84 percent more today than in 1994: $35,443, compared with $19,276.
The difference between the two projects, other than scope, is the return on investment at resale. A homeowner who did a minor kitchen remodeling in 1999 can expect to recoup 72 percent of costs when the house is sold, according to the magazine survey. One who did the major kitchen model will make back almost 100 percent.
In 1994 the return was 97 percent for the minor remodeling and 90 percent for the major job.
What do the data tell us?
At best they send mixed messages. It is a fact that the sustained residential construction boom--two years to four years, depending on the region of the United States--has created shortages of building materials and qualified labor.
Remodelers and builders are competing for the same resources, and builders with the deepest pockets appear to be winning the battle. The materials shortage--primarily drywall, insulation, lumber, cement and brick--resulted from sustained building activity coupled with the failure of many suppliers to expand production capacity.
As result, there have been drywall shortages throughout the country, delaying remodeling projects. The cost of drywall rose 10 percent to 20 percent in 1999, compared with 1998.
Labor shortages also have delayed remodeling projects and made them more costly. A survey taken a year ago of builders attending the National Association of Home Builders' annual convention in Dallas found that 35 percent were expecting problems with obtaining drywall and that 75 percent expected to have difficulties finding labor.
The effects of higher material and labor costs have been more pronounced in the last two years than in the previous three, an observation borne out by comparing Remodeling magazine surveys over the years.
The cost of a major kitchen remodeling increased 26 percent from 1994 to 1997, a review of the magazine's surveys showed. However, between 1997 and 1999, the cost rose 45 percent.
The Remodeling magazine survey results have been included for the last two years in the National Association of Realtors magazine, which is published and distributed during the association's annual convention, held last year in Orlando.
Part of the reason is to provide guidelines to real estate agents when sellers ask how to increase the value of a house at resale time.
The danger of remodeling to sell a house is that "many owners of older houses tend to go all new and glittery instead of saving the things that make the houses charming, and that can chase buyers away," said Joanne Davidow, a vice president of Fox & Roach Realtors who sells real estate in Philadelphia's Center City.
Although the 1999 survey results show that a major kitchen remodeling returns 100 percent at resale, Davidow, a real estate agent for more than 20 years, remains cautious.
"Doing a major kitchen renovation just to sell a house is rarely cost-effective," Davidow said. "If someone has a 30-year-old kitchen, I'll tell them to consider buying new appliances and painting the cabinets.
"A house that looks perfect will get the highest price, but putting in a kitchen probably isn't the way to go," Davidow said.
Such a remodeling project might be attractive because most buyers are not handy and do not want to begin life in a new house with a contractor putting in a new kitchen, said Noelle Barbone, manager of Weichert Realtors' West Chester, Pa., office.
"Kitchens sell houses, without any argument," Barbone said. "Kitchens get old fast, as quickly as carpets do. They don't go gracefully, either. A house with a bad kitchen gets lowball offers. A house with a beautiful kitchen will get multiple offers, and the initial offers will be high-quality ones."
Barbone acknowledged that it would be more cost-effective to have the buyer, rather than the seller, replace the kitchen.
Costs of remodeling projects are increasing throughout the country at about the same rate. At the same time, the real estate boom of the last few years has helped push up median sale prices of houses and might be one reason major kitchen remodeling jobs bring ever-higher returns.
Barbone is on the mark when she says that a majority of buyers do not want to embark on a major renovation project as soon as they move in. The danger, most real estate agents say, is to undertake major projects before you get a feel for what could really improve the house and build up equity in it.
Most agents agree that people who plan to sell their houses should not start a major project just to sell it.
"The buyer always perceives that little points are costlier than they are, so you try to have them address those points," said Michelle Dayoub, an agent with Re/Max Services in Blue Bell, Pa. "Typically, I'll tell them to clean the house up as well as they can and paint where it is appropriate.
"If the carpet needs to be replaced, then they should offer some sort of carpeting allowance, not replace the carpeting themselves, because buyers' tastes may be different," Dayoub said.
Dayoub believes that if the kitchen is outdated, the seller should reduce the price accordingly, not embark on a major kitchen renovation project that reflects the seller's tastes rather than buyer's.
Although some agents and remodelers have questioned the data and the value of Remodeling magazine's annual survey, Fred Flick, vice president for research for the National Association of Realtors, said the percentages on return at resale "are very representative of remodeling changes that bring value over time."
To bring "more balance and weight to the estimate resale value," Flick said, the association and Remodeling asked more appraisers to participate in the latest survey.
"Since appraisers tend to take the long view of remodeling projects, the effect is that values are now lower by 5 percent to 10 percent" than in past reports, he said, which gives a more realistic value to the return on a major kitchen remodel than if the traditional means of calculating resale returns had been used.
Flick emphasized that return on investment depended upon the house, neighborhood and region.
Survey aside, a homeowner who is thinking of remodeling should talk to several real estate appraisers or brokers to get their opinions on the market value of improvements.
There are times that we all improve our homes for our own convenience, wants and needs, but the money we decide to spend is not necessarily worth the same to someone else.