18 January 2010

Return to Spender

The Columbus Dispatch

Wondering where to spend your home-improvement dollars this year?

Start by thinking small.

A nice new sunroom, perhaps? Or a home-office makeover?


A new front door?

Now you're talking.

A steel front door, at an average cost of $1,172, is the only home improvement that might pay for itself when the home is sold, according to the latest "Remodeling Cost vs. Value" survey, the most widely cited attempt to measure the payback on home-improvement projects.

The report provides more evidence that, during this economy, the best investments are the frugal ones.

The biggest bangs for the buck, the study says, come from modest exterior maintenance projects that boost a home's curb appeal, not flashy renovations or additions.

"For years and years, kitchens and baths were at the top of the list, and they are still popular," said Sal Alfano, editorial director of Remodeling magazine, which publishes the study with the help of the National Association of Realtors. "This year, because of the economy, those at the top of the list are all fairly inexpensive projects."

The findings are based on a survey of more than 4,000 real-estate agents, including 52 in central Ohio. The agents were provided costs on 33 remodeling projects and asked to estimate how much of that cost would be recouped were the home sold.

Eight of the 10 best returns stemmed from exterior improvements that cost less than $14,000. A new front door led the list, with an estimated return of 128.9 percent nationally.

Other improvements that boasted at least a 79 percent return were installing a new wood deck, adding fiber cement or vinyl siding, or building a bedroom and bath in the attic.

The worst returns came from adding new space -- such as sunrooms, bathrooms, garages or master suites, all of which were expected to return less than 58 percent of the remodeling cost.

Renovating existing space, such as attics or basements, is more likely to yield a higher return because the initial expense is lower.

Central Ohio contractors weren't surprised to see that more-modest projects yielded a greater return.

"Everybody's sort of battening down the hatches," said Randy McGarvey, a co-owner of Newlook Sidings remodeling company in Gahanna. "What you're finding is rather than people increasing square footage, they're making the best use of their existing space."

McGarvey and other contractors point out that federal tax credits have helped lower the cost for improvements that reduce a home's energy use, such as new windows.

"The report is consistent with what we're seeing, as far as people repairing, fixing what they have, compared with putting on the bigger additions," said Todd Schmidt, president of Renovations Unlimited in Grove City. "The energy tax credit has been a big help for that, with replacement windows, furnaces, air conditioning, things like that."

Still, Schmidt said, homeowners should be careful about putting all their improvement money into projects that can't be quickly seen.

"Kitchens and baths are still the best return on your money," he said. "New windows and a furnace won't really impact whether the house sells."

No matter what the project, homeowners shouldn't remodel with the goal of making money. The 33 home improvements return an average 64 percent -- among the lowest rates in the survey's 22-year history.

In Columbus, the return was even lower: The projects recouped only 59 percent of their cost, ranging from 42.3 percent for a home office remodeling to 84.3 percent for converting an unfinished attic to a bedroom and bath.

The relatively low return-on-investment reflects the overall state of the housing market, which is driven by careful buyers unwilling to spend a lot on frills.

"Part of it is simply the fact that money is getting tighter," Alfano said. "These are all need-to-do type projects."

Alfano and Columbus-area contractors say the study is a valuable guide, but they cautioned that remodeling decisions ultimately depend on the owners' needs and the home's condition. If your home has reasonably good siding but a terrible kitchen, for example, your money is best spent on the kitchen remodeling, regardless of what the report shows.

Furthermore, they note, most homeowners who remodel aren't doing it with the idea of selling.

"The report is just fantastic to give to clients," said Bryce Jacob, president of the local chapter of the National Association of the Remodeling Industry. "But, when we're doing a project for someone, they're not looking to turn it around and sell it quickly.

"If you're planning to stay in the space more than five or 10 years, it really doesn't make much difference," added Jacob, a vice president with Dave Fox Remodeling in Columbus. "And there's the plus of living in the space. There's a huge improvement in your quality of life."

The report suggests that buyers are more concerned with maintenance-free and energy-efficient homes than larger homes that boast flashy details.

But Alfano cautions about reading too many long-term trends into the report: Home remodeling and buying habits change with the overall economy.

"For some people, it's a no-brainer: They want to live smaller; they want energy efficiency," he said.

"But for a lot of other people, when they feel comfortable with the economy, we'll be right back where we were."

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