Remodeling: Cost vs. Value
When we’re not writing these posts we are doing one of many tasks in what we affectionately refer to as the “information business” or “media”. Our nationally syndicated home improvement radio program, magazine column and television show give us the opportunity to share information on the subject that is most dear to us, home improvement.
In addition, we still operate our design/build remodeling company in the San Francisco Bay Area. We are in our thirteen year. One thing that we have learned in both businesses is that Americans are mad about home improvement. Whether it’s as minor as new vinyl in the bathroom or a elaborate new master suite addition, homeowners are putting money into their homes in record numbers.
But unlike in the 1980’s, people are making improvements for reasons other than a return on investment, studies show. People are using their homes as a means of “getting away” from the stress work world, a place to unwind and relax. People are putting money into their homes to meet their emotional needs. It’s called return on enjoyment.
Since 1978, spending on remodeling projects has nearly tripled from $37.5 billion to an estimated $118.5 billion in 1996 according to statistics compiled by the National Association of Home Builders (NAHB). What’s more, the NAHB predicts that spending will reach a whopping $143 billion by the year 2000 – with the majority of these dollars spent on improvements rather than maintenance.
Home improvement budgets can run from a few hundred dollars to upward of a couple million dollars. In 1996, the average remodeling job was $22,155, according to the NAHB. A majority of these projects are paid for with cash and savings. Another popular method of payment is the home improvement loan, equity line of credit or refinancing.
Unlike the 1980’s when neighborhood cocktail-party chatter inevitably led to how spectacularly house prices were increasing, most homeowners today have given up the notion that they’ll make a killing from their improvements when it comes time to sell. Instead, they are looking first at generating the greatest possible return on comfort and enjoyment and the ability to generate better-than-bank interest.
If you’re not convinced that home improvement is popular, just have a look around town. Chances are one of the mega home centers has sprouted up someplace close by. And if it hasn’t, just wait. Contractors, suppliers and retailers are riding the home improvement wave. Just look at the major chains that sell to both contractors and the do-it-yourselfer. Besides the emotional payback that a homeowner gets from improving his home, there are other factors that contribute to the home improvement rage.
For starters, the housing stock is old. Nearly 30 percent of all homes today were built before 1940, while the average American home is more than 25 years old. Since kitchen cabinets have a life expectancy of 15 to 20 years and bathroom fixtures a span of 10 to 40 years, many homes built during the post World War II building boom are overdue for a fix-up.
When homeowners decide to tackle these major projects, they often use the opportunity to add more space to make their homes look like new housing stock. Perhaps the most significant difference between old and new homes is size. A recent survey by the home builders association found that 65 percent of homeowners said the need for more space was the number one reason they wanted to remodel. Homes built in the 1850’s, for example, had less than 1500 square feet of finished space, compared with 2,000 square feet found in a median-sized house today.
But, it’s not all about space. Adding a second bath to an existing one-bath home is by far the best improvement one can make, both in terms of convenience and payback. However, the according to remodeling magazine, a respected industry trade journal, the most popular home improvement is a minor kitchen remodel. This can range from new flooring and appliances to cabinet refacing and lighting improvement.
Not far behind is a major kitchen remodel. Generally, this is what we refer to as a complete “gut”. Here, all of the existing fixtures and finishes are removed, wall and window modifications may be made and an entirely new line of finishes is installed. New cabinets, new flooring, new appliances, etc.
Homeowners are looking toward the master bedroom as a retreat – a place to relax and unwind. Hence, the master suite conversion. If the master bedroom doesn’t have a bath, one is added. If a bath does exist and it isn’t large enough for two, it is made larger and more comfortable. Storage space is improved also. Closets are made larger or a second closet is added.
Additions of all sorts are becoming more and more popular. A family room, bonus room for entertaining, space for an elderly parent or young adult going to college are among the most prevalent. The demand for home offices has grown radically. A second phone line, a computer, a fax and a converted bedroom or a bedroom addition and you have a home office. In fact, this column was generated from a home office.