Today's housing market is leaner, pricier and more competitive than ever – and that has more homeowners deciding to remodel rather than move. Home renovation is a booming business. The choices for upgrades are endless, but some offer a far better payback than others.
Just a year ago, more expensive renovation projects were considered more valuable when reselling the home, but that has changed. There is strong and growing demand today on the lower, more affordable end of the market; that is where the real shortage of listings lies. Fancier homes with high-end finishes are more plentiful and in less demand.
"If you spend lots of money to upgrade with the idea of selling, you may have a bit of a challenge because you're pricing yourself out," said Craig Webb, editor-in-chief of Remodeling Magazine, which just released its annual "Cost versus Value" report. Researchers there estimate the cost of specific projects in specific housing markets and then survey local real estate agents, asking them to estimate how much higher a home's selling price would be if the project were complete within a year of the sale.
"Last year, the big-ticket items rose more in value than the smaller-ticket items in terms of the payback. We think the reason why they've changed is a general belief by Realtors that the more you spend on a house the harder it is to sell it," added Webb.
This year, the renovation offering the best return is a new garage door, according to the report. It is low cost on the front end, but offers 98 percent return on investment when factored into the resale value of the home. Second is manufactured stone veneer, returning 97 percent of its initial cost in resale. Front door replacement, especially steel, rounds out the top three.
Others offering great returns are deck additions and minor kitchen remodels, not the fancy chef's kitchen with the double dishwashers and a see-through Sub-Zero refrigerator. In other words, the least sexy upgrades offer the best returns.
"Sexy is subjective. You may want to produce the kitchen of your dreams and make it look just like it did when you were watching 'The Brady Bunch' growing up. The next person may come in and look at all the thousands of dollars you spent and say, 'I hate this,'" said Webb.