Home improvement shows fill the television schedules, and home renovation is a popular hobby that allows people to make over their spaces. But it’s important to remember that a home improvement project can be expensive, especially if it involves contractors. And not all projects increase your house value. In fact, it’s quite possible that some can hurt your resale value.
That’s why you need to plan carefully and know which improvements are worth the investment. Fortunately, there are many ways to add value to your home without breaking the bank. And many of these projects are fairly simple and do not require professional help.
You’ll likely have to put in some sweat equity, but it is possible to get a great return on your home improvement project and end up with a space you love and that potential buyers will appreciate. A good way to determine whether you’re able to afford a new kitchen or bathroom is to check the 2023 Cost vs. Value report from Remodeling by JLC, which lists the average costs of major home improvement projects and the percentage of resale value they can expect to receive.
According to the report, the projects that can yield the highest resale value are master suites and bathrooms (65%), outdoor living space (20%) and adding bedrooms (14%). The least resale-valued projects are removing an inground pool (79%), putting in a deck (92%), converting a tub into a shower (87%), installing an energy-efficient furnace/AC (75%), or laying down hardwood floors (70%).
While most homeowners are considering home improvement projects, the pace is slowing after a pandemic-era reno frenzy. The nation’s two largest home improvement retailers reported this week that customers are putting off big renovations and instead opting for DIY fixes. Lowe’s said this week that remodeling activity is off by nearly a third from its peak, while Home Depot said its sales have also dropped.
Consumers may be deferring their pricier plans because they’re worried about a resale market that has softened and higher borrowing rates that are crimping household budgets. But experts say that pent-up demand will bring more shoppers into stores and onto home improvement sites when the economy improves.
It’s also important to consider how long you intend to stay in your home before embarking on a major renovation. If you want to sell in the near future, it makes more sense to do less expensive upgrades that can be easily undone, like painting rooms or replacing light fixtures. If you’re planning to stay for years to come, it’s a good idea to do projects that are both enjoyable and fit in with the style of your neighborhood.
It’s also important to be aware of the tax advantages of some home improvements, including deductions for materials and labor. However, you should consult with a tax professional about how specific projects can impact your individual situation. And if you’re considering financing a project, always talk with a mortgage broker before taking out a loan.