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This article was published on: 12/01/2003

COVER FEATURE: Remodeling’s Return on Investment

BY SAL ALFANO, Editor-in-Chief of Remodeling magazine

Remodeling magazine’s “Cost vs. Value Report” ©2003 by Hanley-Wood LLC. Republication or redissemination of the report is expressly prohibited without written permission of Hanley-Wood LLC.

How much of the cost of a remodeling project can be recovered at resale? Our annual report samples current conditions in 35 markets.

Besides wanting to know how much a remodeling project will cost and when the work will begin and end, buyers and sellers have one core concern: how much the investment will add to the home’s value.

To help you address the question of value for your clients and customers, REALTOR® Magazine has teamed up for the sixth straight year with Remodeling magazine on its “Cost vs. Value Report.” This year’s report specifies the costs of 15 popular home improvement projects and the estimated percentage return in various markets if the owners were to sell their home today.

This year, like last, the report targets the cities listed as top remodeling markets by Harvard University’s Joint Center for Housing Studies. Many of the projects included here feature both midrange and upscale versions.

Cost data for the report is from HomeTech Information Systems, a remodeling estimating software company in Bethesda, Md. HomeTech collects current cost information quarterly from several contractors nationwide. The figures include a typical remodeler’s markup.

Resale values are based on the professional judgment of NATIONAL ASSOCIATION OF REALTORS® members. Surveys containing construction costs for each city, as well as information on median house prices, were sent via e-mail in late summer 2003 to a random sample of appraisers, sales associates, and brokers. More than 300 responded with dollar figures that represent the value each completed project would add to the selling price of the house under current market conditions. In addition to sending the surveys to its membership, NAR collected the value data and tabulated the results. Values in each city represent the average of all respondents in that city. Pay special attention to the national averages, which factor in the opinions of a large number of practitioners.

A grain of salt
The numbers presented here can serve as a guideline for those contemplating the potential return on investment for particular remodeling projects. However, it’s important to acknowledge a variety of factors that can affect both the cost of remodeling and the resale value of homes.

Costs for materials, subcontractors, and labor vary considerably not only in different parts of the country but also among remodeling companies operating in the same market.

There’s more variation on the value side. Return on investment depends on the value of the house itself, the value of similar homes in the area, and the rate at which property values are changing in the surrounding neighborhoods. And, of course, similar houses in different neighborhoods within the same city will vary in value. And a house in a suburban location will vary from its rural or urban counterpart.

Availability of alternatives also has a bearing on a home’s value. In Phoenix, for example, people contemplating a remodeling project may find everything they want in a new home, of which there’s a ready supply.

Finally as every salesperson knows, factors such as commuting distance, quality of schools, proximity to shopping, and cultural activities all play a role in determining real estate values.

Ultimately, you know the markets you sell in better than anyone. The “Cost vs. Value Report” provides a touchstone you can use to help your buyers and sellers make decisions about the size and scope of projects they may want to pursue.

Other measures of value
Unlike other kinds of investments—stocks and bonds or bank CDs, for example—the value of any remodeling project includes elements that can’t readily be measured in dollars and cents.

In some cases, the benefits are tangible. Replacing windows, for instance, typically adds comfort and reduces energy costs. The same is true of remodeling projects that include an upgrade of house systems—replacing HVAC equipment with more efficient models, for instance. And a kitchen remodel often includes upgraded appliances that are both easier to use and more energy-efficient.

Other benefits are intangible but no less real. Adding a family room can improve the quality of life for a growing family. Likewise, increased storage in a new master suite may free up space for an exercise room in another part of the house. Taken together, the overall effect is reduced stress, increased comfort, and improved physical and mental well-being.

And when the house is sold, the equity is tax-free. Few other investments can make the same claim.

EDITOR'S NOTE: Remodeling magazine, published by Hanley-Wood LLC, has been publishing this report annually for more than 15 years. We’d like to thank the editors and designers at Remodeling, as well as the REALTORS® who contributed to bringing you this report.

REGIONAL STATISTICS: Regional statistics were published in the print version, and were available for limited time at REALTOR® Magazine Online. Due to contractual obligations with Remodeling Magazine, the report's publisher, REALTOR® Magazine Online has removed the regional statistics. However, regional statistics are included in reprints.

REPRINTS: Order reprints of the 2003 Cost vs. Value Report for just $5 each plus shipping. Contact Reprint Management Services at 717/399-1900, ext. 118 or at

Remodeling magazine’s “Cost vs. Value Report” ©2003 by Hanley-Wood LLC. Republication or redissemination of the report is expressly prohibited without written permission of Hanley-Wood LLC.

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2003 Cost vs. Value Report Introduction

Values up from 2002

National Averages

Order reprints
Previous reports:
2002 Cost vs. Value Report

2001 Cost vs. Value Report

2000 Cost vs. Value Report