A Reduced Cost vs Value Ratio is Still Good

A Reduced Cost vs. Value Ratio is Still Good

Historically, homeowners find consolation in Remodeling Magazine’s Cost vs. Value Report. The money they plowed into their home in repairs and remodeling is not lost after all; a portion of it is recovered in the home’s appreciation. But because home values dropped in the last few years, the cost/value ratio dropped as well. At its peak in 2005, the ratio hit 86.7%. Since then, it dropped 29 points to 57.7% in the latest report (2011-12). The Midwest (West North Central) ranked at the bottom, at 49.5%.

There’s a positive side to this report.
But let’s look at it more positively. Most people buy houses, not to flip, but to create a home. Ownership, pride of place, stability, family~these ideals motivate the homeowner. So, although you’d like your repairs and remodeling to contribute to the home’s value, you also accept them as a necessary part of life. You maintain what you own. And when you do, you help to stabilize and even increase home prices.

If a repair or remodel is necessary, it’s an added benefit when it increases a home’s value. In spite of the decrease in the cost vs. value ratio, you’re still enjoying at least a 50% return on our investment.

Midwest projects with the highest Cost vs. Value Ratio.
Now, let’s take a look at the top projects in the Midwest. The report splits the Midwest into two regions: East North Central and West North Central. Here’s how the top ten projects compare between the two regions in the midrange category:

East: WI, MI, IL, IN, OH West: MN, IA, MO, KS, NE, ND, SD
Ratio Project Ratio Project
68.7% Entry door replacement 59.9% Attic bedroom
65.7% Minor kitchen remodel 59.5% Deck addition, wood
65.2% Garage door replacement 59.0% Siding replacement, vinyl
64.0% Siding replacement, vinyl 55.2% Deck addition, composite
62.9% Attic bedroom 55.9% Window repl., vinyl
62.7% Window repl., wood 55.7% Two-story addition
62.5% Window repl., vinyl 55.5% Minor kitchen remodel
61.7% Deck addition, wood 55.0% Major kitchen remodel
59.3% Major kitchen remodel 53.1% Window repl., wood
56.1% Deck addition, composite 52.6% Garage door replacement

Attic and second story offers opportunity.
The Attic Bedroom project is ranked third, nationally, at 72.5%. The report explains its popularity as “the least expensive way to add a bathroom and bedroom, and it does so within the home’s existing footprint.” More extravagant, but for a similar reason, the Two-Story Addition ranked #6 on the West Central list. Together, they might be a millwork distributor’s and prefinisher’s best opportunities during the recession.

Midwest homeowners, don’t despair! You’re enjoying a 53-69% return on your investment. Plus, you’re living the American dream of home ownership.

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