Do Home Improvements Provide Financial Returns?

Small home improvements could have big returns

Homeowners around the country should start those home improvement projects they ignored during the recession. Why now? Because home equity is rising, meaning people can now find money more easily to fix up their homes. With that in mind, one tool to guide your clients is Remodeling Magazine's 2015 Cost vs. Value Report, which compares construction costs with estimated resale values for midrange and upscale projects.

In previous years, kitchen and bath remodels have provided the biggest payoffs for sellers, sometimes returning more than 100% on the dollar. But this 2015 study found that small exterior projects have become the most valuable improvement projects in terms of resale. In other words, curb appeal pays off.

Of the top 10 projects in terms of recouped costs, nine were on the outside of the home, where you don't get a second chance to make a first impression. According to the study, here are five inexpensive exterior projects with a big return:

• Steel entry door (101.8% return)
• Manufactured stone veneer (92.2% return)
• Mid-range garage door replacement (88.5% return)
• Siding replacement with fiber cement (84.3% return)
• Adding a wood deck (80.5% return)

By contrast, a minor kitchen makeover is expected to return 79.3% of the cost.

Since 2003, sellers have seen greater financial returns on replacement projects than on full-scale remodeling projects. But the gap is even larger this year. Overall, replacement projects return 73.2% of every dollar spent, whereas remodeling projects return only 60.8%. According to Remodeling Magazine, the reason is that the cost of most projects is rising at a faster clip than home values. But that too shall pass as the market continues to improve.

Lew Sichelman, an award-winning journalist, has been covering the housing and mortgage markets for more years than he cares to remember, starting as real estate editor at the long-defunct Washington Daily News and Washington Star newspapers and finishing with a three-decade stint with National Mortgage News. His weekly consumer column, “The Housing Scene,” is syndicated to newspapers throughout the country.