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Planning :
Financing :
Return On Investment
Return On Investment
Return on investment varies, depending on where you spend your dollars and
the strength of the housing market. A good real-estate agent should be
able to provide feedback specific to your home and neighborhood, but the
annual Cost vs. Value Report—a joint study done by the National
Association of Realtors and Remodeling magazine—provides national
and regional averages. The report estimates the cost of an average home
improvement project and compares it to the value it would recoup if the
home sold a year later. In 2007, more than 2,700 real-estate agents and
appraisers in 60 cities provided ROI estimates.
While the housing slump isn’t over, the decline has slowed. For homeowners
looking to update their kitchens, this means the climate for remodeling
is still OK. The rapid rise in costs has been curbed, and ROI values
haven’t fallen significantly. In 2007, the average cost for a major
upscale kitchen remodel increased by just 1.3 percent, compared to a
32.4 percent increase the year before. Still, at this point, you can’t
expect 100 percent or more ROI unless you’re staying in the home for
more than a year after the remodel.
Minor Kitchen Remodel, Mid-Range
For example, the 2007 report puts the national average price of a
mid-range minor kitchen remodel at $21,185, averaging a return of
83 percent (down from last year’s 85.2 percent) a year later.
What is a minor kitchen remodel? According to Remodeling, it’s a
200-square-foot kitchen with 30 linear feet of cabinetry and
countertops. The cabinets get refaced with new raised-panel wood doors,
drawers and hardware, but the boxes stay. Laminate countertops and vinyl
flooring are removed and replaced with the same material, but in updated
colors and patterns. You also get a new, energy-efficient wall oven and
cooktop, a new mid-priced sink and faucet, wall covering, and a new
paint job on your trim.
Major Kitchen Remodel, Mid-Range
A major kitchen remodel at a mid-range price will run an average of
$55,503, according to the report. A year later, you can expect to
recoup 78.1 percent (down from 80.4 percent) of that. The project
includes creating a new layout with a 3-by-5-foot island for a
200-square-foot kitchen. It features 30 linear feet of semi-custom wood
cabinets, laminate countertops, and a double-bowl stainless-steel sink
with single-lever faucet. Add new energy-efficient appliances: wall
oven, cooktop, ventilation system, built-in microwave, dishwasher,
garbage disposal, and custom lighting. Finish up with new vinyl flooring
and paint for the walls, trim and ceiling.
Major Kitchen Remodel, Upscale
Price tag: $109,394, according to the report, with an ROI of
74.1 percent (down from 75.8 percent). It's an easy bill to run up
in a 200-square-foot kitchen with 30 linear feet of custom cherry
cabinets with interior accessories, natural stone countertops, and an
imported ceramic or glass tile backsplash. Appliances include a built-in
refrigerator, cooktop, 36-inch commercial-grade range and vent hood,
built-in warming drawer, trash compactor and built-in
microwave/convection oven. Then add a high-end undermount sink; designer
faucets; built-in water filtration system; general, task and
under-cabinet lighting; cork flooring; and cherry trim.
The Changing Market
Compared to the 2006 report, the average price of all three types of
kitchen remodels rose slightly, from $17,938, $54,241 and $107,973,
respectively. That's a cost increase to the consumer of 18.2 percent for
a minor kitchen remodel, 2.3 percent for a major mid-range remodel and
1.3 percent for an upscale.
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