The 35th annual Cost vs. Value report by Zonda shows improvement projects that are on the exterior of the house continuing a multiyear trend of providing the greatest return on investment (ROI) to homeowners.
Of the 22 remodeling projects in the report, 11 are exterior replacement projects, and all of these rank within the top 12 projects with the highest ROI. At the top is the replacement of the garage door (at No. 1), new siding (including manufactured stone veneer as an exterior accent at No. 2 and fiber cement at No. 4), and windows (with vinyl replacement windows at No. 5 and wood replacement windows at No. 7). The one exception to the exteriors trend, sitting at No. 3, is the minor kitchen remodel—a modest kitchen face-lift that offers a relatively high return when done prior to the sale of a house. The reason this ranks high stems from the nature of the Cost vs. Value report.
The Cost vs. Value report aims to answer a specific question: What value does a particular remodeling project add to the sale price of a home? This is only one kind of value that these projects can provide, but it proves to be an important assessment.
What Sort of Value?
The value data in the report was derived in prior years from surveys of real estate professionals who were asked to rate the value of the 22 projects in their area. In the past two years, Zonda has revamped the report’s methodology, providing an econometric model that overcomes a past difficulty of surveying a sufficient number of real estate professionals in some areas. The new model sifts in a range of other relevant variables, including local GDP, existing home sales, existing home values, changes in existing home sales, existing home values, and housing starts, among others. What’s important to grasp here is that all of these variables (yes, even new housing starts) influence the sale price of existing homes in specific markets, and that is what defines the value side of the calculated ROI.
There is more than one kind of value. Lifestyle enhancement or increased accessibility or the ability to accommodate a growing family are all reasons homeowners take on remodeling projects, each with its own type of value. Cost vs. Value focuses on another sort—the value that leads to a higher sale price for an existing home. If we begin to think a bit more like a real estate professional, we begin to grasp how to fully understand this value and, correspondingly, the return on investment.