Renovating doesn't pay off like it used to - CNN

[y.painting]

NEW YORK (CNNMoney.com) -- Home remodelers are getting less bang for their bucks. For the fourth straight year, renovation jobs have added less to resale values relative to their costs, according to an annual Remodeling Cost vs. Value Report released this week by the National Association of Realtors.

The average remodeling job cost $50,908 in 2009 and added $32,497 to the value of the home, a ratio of 63.8%. That was down from a cost-to-value ratio of 67.3% in 2008, when the average was $49,866 and the added value was $33,568.

Continue Reading (http://money.cnn.com/2009/12/18/real_estate/return_on_renovations/index.htm)

http://i2.cdn.turner.com/money/2009/12/18/real_estate/return_on_renovations/chart_cost_vs_value.top.gif

[nEighter]

whatever happened to getting something updated because you want to? Cause you want to live in a nicer place? Has our industries ALWAYS been led by the amount it will drive value of the property up?

[Dusty]

Doesn't suprize me because of the current housing market. In time it should level out, but I don't think renovations will ever add the same value to a home they did just a few years ago.

[orson]

I'm always confused by that too N8, people will go out and spend 40k on a car that's going to be worth 10k less when they finish driving it off the lot and worth half as much when they trade it in but their home remodeling cost is supposed to recoup them 100% value. Doesn't make any sense.

Not to mention that if they want it to still look good enough to actually contribute the value of their home 5 or 10 years later it's going to cost more. That's a really hard one to get through someone's head.

[naptownCr]

I'm always confused by that too N8, people will go out and spend 40k on a car that's going to be worth 10k less when they finish driving it off the lot and worth half as much when they trade it in but their home remodeling cost is supposed to recoup them 100% value. Doesn't make any sense.

Not to mention that if they want it to still look good enough to actually contribute the value of their home 5 or 10 years later it's going to cost more. That's a really hard one to get through someone's head.

This is the most frustrating part of the remodeling process.
The car analogy is great and I used itone time however it backfired on me.
Lady wanted a new master bath with whirlpool tub, steam shower, marble everything. Gave her her an initial ballpark of about 35-45K. Her reaction was that she would never get it back out of her house. Now she had a Mercedes 500sl convertable sitting in the driveway. I asked her how that investment was working out for her. And stated the reasons Orson did. She was actually honest enough to admit that the Mercedes could be seen by everyone but her bathroom was private and therefore would not be avisible status symbol.
Then she asked me to leave.

[nEighter]

OUCH! nappy that hurt! LOL

[naptownCr]

OUCH! nappy that hurt! LOL

Being asked to leave was a regular occurance where I used to work.
Once they heard the price they were done.

[Bodger]

I would have asked that lady when was the last time she settled in to take a good dump in her 500 SL. :laugh3:

In LA, with most of my clients, it's always been about adding equity. More often than not anyway, that subject comes up more frequently than quality of living in the space.

[Decoman]

Problemis most people are borrowing against the house to do the remodel IE the HELOC craze... now people would actually have to spend there own money or unsecured loan to remodel and there less of that out there.

I finished my basement cuz i would use it... I want to add on my garage but it will be costly and my house value is down 40% i don't think it would be worth it.

[nEighter]

4yrs ago i had an exterior I looked at. I estimated 20K in work to be done ( probably a LOT more) they asked me how much it would increase their equity. I blankly looked at them and told them it would get there house to what it is worth currently (before the crash). They told me it wouldn't be worth it.. (Indian couple) and I just said point blank.. "so you don't mind the squirrels coming in and out of the house, or the wood pecker holes all around the house? They wanted to work out some deal to do a little here and there, but I could never get them to commit. Oh well I guess.

[Bodger]

Problemis most people are borrowing against the house to do the remodel IE the HELOC craze... now people would actually have to spend there own money or unsecured loan to remodel and there less of that out there.

I finished my basement cuz i would use it... I want to add on my garage but it will be costly and my house value is down 40% i don't think it would be worth it.


Exactly. Most of the checks written to my company for remodeling in the past ten years or so have been from equity lines of credit.

Now, I'm bidding jobs and people are telling me they are going to be using savings, and maybe a modest equity loan, and they can't afford to do it.

[nEighter]

wasn't the republic of the united states R.U.S. going to look into why banks are not loaning money? Or do they have too many other issues to tend to.. like making sure whaling boats get a subsidy?

[naptownCr]

The point many are missing when looking at the cost/value reports that we all love and adore is that it is based on the house being sold within one year.
there is no accounting for long term gain, and most of the loss can be attributed to the general downturn in the housing price market. All right you will only get 80% of your investment back in the first year. But if you factor in the inflation rate and historic (not the Hysteric) gain in property values over the past 50 years it works out to be about 5% per year. It still beats many other investments and you get to use and enjoy it as opposed to watching your Schwab account go up and down.

[y.painting]

I'm always confused by that too N8, people will go out and spend 40k on a car that's going to be worth 10k less when they finish driving it off the lot and worth half as much when they trade it in but their home remodeling cost is supposed to recoup them 100% value. Doesn't make any sense.

But new car sales (ignoring the c4c program) are way, way down in this economy as well, so that analogy doesn't work so well. The remodeling recoup problem described in the article is problematic as it applies to this economy, not the past.

[plainpainter]

I'm convinced the only way to get around this problem is to buy the damn house yourself, renovate it, and then sell it back to the public. Screw working for homeowners, they suck.