Understanding Cost vs. Value

The home improvement industry is stronger than it has been in over a decade with no signs of slowing in the United States. With more people working and spending time from home, coupled with a nationwide shortage of housing and record-high home prices, it comes as no surprise that renovations and other home enhancements are top of mind. We see these trends hold true not only nationally, but also in our local St. Louis metro market. If you’ve already made upgrades or you’re thinking of selling in the near future, you’ll want to continue reading. It’s important to understand the cost vs. value of each remodeling project and how that will ultimately affect your home’s value. Depending on the market, that bedroom addition or bathroom remodel may not net you the most return on investment (ROI). 

When you schedule a listing consultation with The Realty Shop, our expert agents will review how much you can reasonably expect to recoup from improvements that have already been completed. We will also advise on which (if any) improvements you may want to consider prior to selling. 

What is Cost vs. Value?

One of the best methods of judging the value of home improvements against the cost is the annual Cost vs. Value Report. This report aims to find the balance between the cost of an action item and its overall benefit to a homeowners bottom line. Cost is easy to define—the amount of money needed to complete the project. Value, however, varies widely depending on the project and geographical location, and changes over time based on market trends. Some projects may cost a great deal and might be perceived to be of high value, but when you put the dollars and cents together, may actually end up being of low value.

A prime example of projects that have a very low cost to value ratio in many situations is sunrooms. A full sunroom needs careful design, proper insulation and a ton of maintenance. Costs are high because they involve many sub-projects, including electrical, flooring, lighting, and more. From a resale standpoint, sunrooms tend to have a low value and aren’t necessarily sought after. You may be better off thinking about a gazebo or screened porch to increase resale value instead. 

The example above is of course assuming your goal is to maximize ROI. If you want that sunroom and can justify the cost…go get that sunroom! Just don’t expect it to add the same amount of value to your home that you paid for the project to be completed. 

The Cost vs. Value Report

Powered by Zonda and published by Remodeling Magazine, the Cost vs. Value Report is an annual set of remodeling estimates that tracks which home improvement projects provide the greatest return on investment. At the end of each year, these publications release the report for the preceding year measuring the estimated average cost of remodeling projects across the United States. 

This report pulls an astonishing amount of data from U.S. markets, as well as national surveys from a vast network of Realtors. Our agents further break these estimates down and tailor them to our local St. Louis market for our clients benefit. Here are few examples of popular remodeling projects and their ROI:

Minor Kitchen Remodel$27,103$14,48464.5%
Midrange Bathroom Remodel$26,371$14,71355.8%
Composite Deck Addition$23,628$14,60861.8%
Garage Door Replacement$3,994$3,67992.1%
Window Replacement$23,575$12,90754.7%
Data pulled from Remodeling 2022 Cost vs. Value Report, St. Louis Market

Thoughts to Consider

There are two key takeaways for any homeowner to keep in mind: all remodeling projects depreciate in value, and virtually no projects return 100% on their investment.

Home upgrades decline in value over time for many reasons including fickle trends, new technology, and natural wear and tear. From the data released in the Cost vs. Value Report, we can see which projects will likely return far lower than their actual cost.

It’s important to note as well that it’s impossible to quantify everything and the price point of the home may also affect these figures. For example, installing an in-ground pool with a $200k home will return far less value than installing one on a luxury home. The maintenance costs alone could be enough to steer away buyers in the $200k market. This would make the cost vs. value of the project very low at the $200k home. However you could see a greater cost vs. value ratio at a luxury price point.

This report pulls figures from a diverse of source of information, though it should be noted that do-it-yourself remodeling and sweat equity are not taken into consideration. All estimates take into account paid outside labor. 

Bottom Line

It can be deceptive to being a project simply because it appears from the Cost vs. Value Report to help your home gain value. Not all improvements will be appropriate for every house and blindly improving your home is rarely a good idea. It’s important to consult a professional contractor as well as an experienced Realtor—like the ones at The Realty Shop. Our experts will also provide you with a Comparative Market Analysis (CMA) to determine your home’s value in the current market.

If you’re thinking about starting your next remodeling project, we have an extensive list of local contractors, electricians, plumbers, painters and so much more that we trust and can recommend for a great experience. Contact The Realty Shop today to learn more!