Home remodeling costs are down - but so is value - according to the Cost vs Value Report 2023.
The annual Zonda Cost vs Value report came with a disclaimer this year. With the report reflecting data collected at the end of 2022, readers were advised to keep national economic factors in mind while using the Cost vs Value Report 2023.
Mortgage rates and inflation both rose in the fourth quarter of last year, making it “the darkest hour of 2022,” according to Todd Tomalak, head of Zonda’s Building Product Research & Advisory Practice. “But it provides an important perspective to capture. We learn what projects maintain a premium to homebuyers when times are tough and they can’t afford everything on their wish list.”
As trusted advisors for homeowners looking to remodel, the Improveit team dug into the research. Here’s a look at the biggest Cost vs Value trends, and what they mean for homeowners considering a remodeling project.
Did you miss the 2022 Cost vs Value Report? Find it here.
Good News: Home Remodeling Costs Are Coming Down
The supply chain is stabilizing since the pandemic, and homeowners will be thrilled to learn that, nationally, home remodeling costs fell for 21 out of 26 projects in the Cost vs Value 2023 report. On average, costs fell 7.3% year-over-year for those 21 projects, and were down 5.6% overall. (We left numbers for HVAC Conversion out of this calculation, as this project was new to the report in 2023.)
For the three projects where prices rose, the increases were mostly modest. This is also good news considering that, nationally, home remodeling costs were up substantially two years in a row. Smaller increases, averaging just 3.1% this year, indicate that price growth is slowing as the supply chain recovers.
Cost vs Value Report 2023 Shows fluctuating remodeling costs
On the value side of the Cost vs Value equation, results are more of a mixed bag. Of the 25 projects carried over from 2022, only nine saw their values increase year-over-year. Value is up an average of 14.4 points for those projects, which include bath remodeling, midrange kitchen updates, and several exterior remodeling projects, including window replacement and siding updates.
Additionally, for the first time in six years, the report shows ROI over 100% for multiple projects. This means homeowners would recoup the entire cost of these remodeling projects (and then some) at resale. While we occasionally see ROI over 100% at a city level, the last time this happened nationally was in 2017 for attic insulation – a project which Zonda no longer includes in the Cost vs Value report.
This year’s highest ROI projects are all exterior projects, including door and siding updates, HVAC conversion, and manufactured stone veneer.
Is now a good time to remodel?
Knowing that costs are down for most remodeling projects, but value is also down for many of them (nationally 13 projects lost an average of 16.4 points in value), is now still a good time to remodel?
The short answer is yes. As with most service industries, remodeling costs rarely decline year-over-year, so any decrease in remodeling prices is a savings opportunity homeowners should take seriously. While costs will differ by project and city, we’ve found six projects where costs are down and value up – making them the best projects to maximize your ROI.
Value, or return-on-investment, requires other considerations. Most importantly, what does “value” mean to you as a homeowner? The Cost vs Value report looks specifically at the dollar value of a project at the time of sale. But with mortgage interest rates stuck above 7% and homebuying considerably slower than last spring, remodeling for resale is not a popular move. Instead, many homeowners are choosing to remodel instead of moving.
In that case, the definition of “value” changes to how you want to experience the home you’ll be staying in longer. Does this mean a kitchen update? Replacing your garden tub with a walk-in shower? Boosting your curb appeal? Making energy-efficient updates with their own built-in ROI? The choice is yours.
add value to your home and your lifestyle with the right updates
The options are endless, but they all point to the same conclusion: Enjoying your home the way you want to is an essential part of the cost vs value equation.
As you consider your options, the Improveit team is ready to help you weigh your needs and wants with the beauty and functionality of your home, all on a budget that makes sense for you. Reach out today to schedule a free design consultation and learn more!