As the housing market recovers, spending on remodeling is rising. Whether to increase resale value or to simply make their surroundings more contemporary, homeowners spent 9 percent more on renovations in 2012 than in the previous year, according to a recent study by the Joint Center for Housing Studies at Harvard University.
Renovation spending is expected to increase again this year, the study says.
The top improvements homeowners make, according to the latest American Housing Survey, are upgrading appliances and major equipment, as well as flooring, paneling, ceilings, windows and doors. Garages, at a median price of $15,000, are the most expensive project. Kitchen remodeling, at a median price of $5,000, is the next most expensive one, followed by roofing, at a median cost of $4,559.
Growth in remodeling is fueled by several factors, experts say.
Rising home equity has given owners incentive to resume spending on improving their properties.
Underwater homeowners, who'd like to sell but can't, are instead upgrading. Many who aren't underwater, drawn by the sellers' market, are investing in renovations that can help them get top dollar once they list.
And elderly people are putting money into wider doorways, ramps, elevators and easily accessible showers so that they can remain independent in their homes as they age.
Still, many homeowners who want to increase resale value when they list may feel clueless in determining which projects will yield the best return. Is it best to do a full-scale kitchen and bathroom remodel, or will some paint here and there do?
If you're looking for the greatest return on investment, start at your front door. According to Hanley Wood, a publishing and information firm that focuses on housing construction issues, a steel entry-door replacement job will cost an average of $1,207, work that will yield about 98 percent in resale value.
Vinyl siding replacement averages about $12,007 and yields about an 84 percent return. And adding a wooden deck is also a good investment: Costing an average of $10,696, it returns about 91 percent at resale.
The projects that recover less are sun-room additions, 58 percent; bathroom additions, 53 percent; and home office remodels, 44 percent.
Such information may be useful to determine which option is best. For instance, homeowners who install steel entry doors may pay less and recoup more. A fiberglass door recoups 66 percent of its $3,481 cost, according to the Hanley Wood study, compared with the 98 percent recovery of the $1,207 cost for steel doors.
The results reflect "what real estate agents are seeing," said Jonathan Smoke, chief economist for Hanley Wood.
"These numbers are useful to help you understand what you're spending and to help homeowners set priorities," he added. "But most people improve their homes based on their lifestyle needs, and they do not focus on resale."
Clearly, it's not necessary to spend a ton of money on a remodeling job if the owner is willing to put in a little work. About 37 percent of these projects are done by the homeowners instead of professionals, according to the American Housing Survey issued by the Census Bureau and the Department of Housing and Urban Development.
The American Housing Survey found that, from 2009 to 2011, owners spent a median of $3,200 on home repairs. Other studies show this number increasing — welcome news to the remodeling industry after a long downturn. During the recession, home building and improvement spending plunged to 2.8 percent of gross domestic product from 5.2 percent before the downturn.