The 35th annual Cost vs Value report from Zonda shows improvement projects that are on the outside of the house, continuing a multi-year trend of providing the greatest return on investment (ROI) for homeowners.
Of the 22 remodeling projects in the report, 11 are exterior replacement projects, and all of these are among the top 12 projects with the highest ROI. Shown above are garage door replacement (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 exterior trend, which ranks No. 3, is the minor kitchen remodel—a modest kitchen facelift that yields a relatively high return when done before the sale of a home. The reason this ranks high is due to 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 selling price of a home? This is only one kind of value that these projects can provide, but it turns out to be an important assessment.
What kind of value?
The value data in the report was derived in previous years from surveys of real estate agents who were asked to estimate 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 previous difficulties in surveying a sufficient number of estate agents in some areas. The new model sorts in a number of other relevant variables, including local GDP, sales of existing homes, values of existing homes, changes in sales of existing homes, values of existing homes and housing starts. What’s important to understand here is that all of these variables (yes, even home starts) affect the sales price of existing homes in specific markets, and that’s 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 why homeowners take on remodeling projects, each with its own type of value. Cost vs. value focuses on a different kind—the value that leads to a higher sales price for an existing home. If we begin to think a little more like a real estate agent, we begin to understand how to fully understand this value and the corresponding return on investment.