Although the costs used in the Remodeling Cost vs. Value Report are based on itemized estimates (see “Methodology”), each CVV Project refers to very specific remodels, with defined areas and defined selections. When comparing the data in this report to actual remodeling costs in a particular geographic area, small differences in the size or scope of a project, or in the quality of finishes and accessories the homeowner chooses, can dramatically affect the price. Although the distinction the Report makes between “midrange” and “upscale” projects provides a range of pricing, it cannot account for all the variations in pricing that exist between different markets. A lot of the extreme variations we have seen in the past few years (due to the effects of the pandemic and ensuing supply-chain disruptions) have leveled out, there always remain disparities in any given market that reflect the wide range in company types, neighborhoods, demographics, disparities in the availability of skilled labor. Material costs, on the other hand, have increased across the board and in some cases sharply. The result is a business climate that exhibits unpredictable pricing within markets and between one market and another.
Smaller Projects
Another factor to keep in mind when comparing costs in the Cost vs. Value Report to local costs for specific projects is that homeowners continue to scale back their remodeling plans, choosing either to reduce square footage below that specified here, or to perform the work in phases to spread the cost over time. Homeowners may be conservative when choosing fixtures and finishes. They continue to trade the savings on lower-priced items for the ability to afford higher-priced items they deem more essential or more desirable.
Subjective Value
The “value” of a project at resale is always subject to forces that are difficult to predict. Changing how a space is used may meet the immediate needs of the current homeowner but may be at odds with what prospective buyers are looking for. Converting a small bedroom into a grand primary bath, for example, may be perceived as the loss of a bedroom rather than the gain of a bathroom. Similarly, adding square footage may solve immediate space needs, but it also adds to maintenance costs and it increases heating and cooling bills, something that may not be welcomed in this era of heightened energy awareness.
How the value of a remodeling project is perceived also depends on a variety of factors that traditionally affect home values, including the condition of the rest of the house, the value of similar homes nearby, and the rate at which property values in the surrounding area are fluctuating. Comparable values are still difficult to judge due to the persistent presence of foreclosed properties and short sales. Until potential buyers are convinced that housing prices have hit bottom, they will not experience any sense of urgency, further contributing to the downward pressure on house prices.
The Cost vs. Value Report provides an accurate snapshot of the national housing market but it is less successful at accurately predicting an individual remodeling project for a particular address. Also, please bear in mind that resale value is only one factor among many that a homeowner must take into account when making the decision to remodel. At the local level, the best course of action is to obtain construction cost estimates from reputable local remodelers and to talk with an experienced real-state professional about home prices in the neighborhood.