As many Americans choose to stay in their mortgaged homes with a low rate instead of moving and taking out a mortgage at today’s rates, more and more are choosing home renovations to modify and update their living spaces to meet their changing needs.
According to home improvement expert Danny Lipford with Today’s Homeowner —who recently released a new study on the average return on investment (ROI) covering 34 different types of home remodels—most homeowners commonly cite higher property values as another reason to complete upgrades. But according to the study, few projects are realistically viable for achieving a high ROI.
In fact, the only upgrade tracked by the study to reach a 100% ROI was replacing garage doors. On average, remodeling projects recouped 69% of costs.
Breaking down the number further, the average ROI for exterior projects such as a garage door replacement or porch addition is 23% higher than the ROI of interior projects. For interior projects, namely kitchen remodels, struggle to recoup costs, but replacing appliances and countertops has a good ROI for a relatively low price when compared to a complete remodel.
“According to data from the Joint Center for Housing Studies of Harvard University (JCHS), homeowners spent $337 billion in home improvements and repairs in 2020, $368 billion in 2021, and an estimated $427 billion in 2022,” Lipford said. “In 2023, spending on home improvements is expected to grow at a slightly slower rate. Mortgage rates are relatively high, enticing homeowners to renovate their current home rather than search for a new one. However, the rising materials and labor costs and the uncertain economic climate may deter some homeowners from taking on new projects.”
Even “luxury” upgrades were found to have a poor ROI with half coming in at 50% or lower.
Of the projects above, an inground pool is perhaps the most uncertain when it comes to estimating the value added to a home. While some homebuyers may prioritize having a pool, others may see it as a downside given the regularly required maintenance and recurring costs.
Over the past couple of years, there has been renewed interest among buyers for homes with pools. Real estate agent Lois Magee remarks:
“Prior to the COVID-19 pandemic, it was regularly a challenge to sell a home with a pool. Prospective buyers recognized that it was very expensive to keep and maintain a pool and some would even inquire about filling in pools, if they liked the rest of the home. However, with social distancing and business closures, pools were a hot commodity and properties with pools became much more attractive than in years past."
Click here to view the research in its entirety.