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Most Popular Home Renovations Do Not Provide a Great ROI

Most Popular Home Renovations Do Not Provide a Great ROI

With mortgage rates on the rise, and home prices at record highs, many homeowners are choosing to renovate their current homes rather than sell and buy a bigger, better place. While that can be a smart move, if the homeowner ever does decide to move, they may be surprised that their major investment in a brand-new kitchen or spa-worthy bathroom may not provide the return they expected.

Hot-Ticket Renovation Trends

A study by Contractor Growth Network found that popular home renovations, such as major kitchen, bathroom, and basement remodels, do not significantly increase home value. Research from Zonda Media shows that homeowners typically recoup only 60% of their remodeling costs when selling. For example, a $100,000 kitchen renovation may only add $60,000 to a home’s value, resulting in a $40,000 loss. Zonda’s Todd Tomalak advises homeowners to disregard renovation trends promoted on HGTV.

What is generating the greatest return-on-investment these days are renovations related to functionality or curb appeal. According to Zonda, the top ROI home improvements are garage door replacements and switching out traditional furnaces for electrified heat pumps, which both yield 103% of the upfront price. They are closely followed by replacing house siding with stone veneer (102% ROI) and putting in a new steel entry door (101%.) Kitchen remodels are more profitable when they minor – painting and updating the backsplash. Even basic mid-range kitchen remodels – refacing cabinets and putting in new countertops, flooring, appliances or fixtures – only turn an 86% ROI.

Making the Right Choice

If you are one of the 95% of homeowners who plan to do a major home improvement project in the next, according to a report by Real Estate Witch, you should carefully consider how much your desired renovation will increase your home value in the end. You may want to call up your real estate agent to find out what renovations are seeing the biggest ROI in your area. It is also important to remember that most remodeling projects end up costing more than the original estimate. A safe way to assess the true cost is to add 10% to the bid you receive.

If you need financing for your remodel, consider a home equity loan or a home equity line of credit (HELOC), especially since mortgage rates are still lower than credit cards or personal loans. A home equity loan provides a lump sum with immediate repayments, while a HELOC lets you borrow as needed and requires interest payments only during the draw period. Both use your home as collateral. Full repayment begins at the end of that initial time.

CONCLUSION: Most Popular Home Renovations

A home renovation project can increase the value of your home, but only if you pick the right feature to change.

If you’re looking to buy a new home or you want to consolidate debt, please contact us today!

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