Reprinted from RIS Media’s Housecall

A strong housing market isn’t necessarily all good news for sellers. As evidenced by Remodeling magazine’s newly-released Cost vs. Value Report for 2018, average return on investment (ROI) for home improvement projects dipped across the board, with “upscale” projects taking the biggest hit.

The report, which measures the average cost of 21 popular remodeling projects and their average resale value one year later, found that garage door replacement has the highest ROI at 98.3 percent (up from 85 percent year-over-year). Backyard patio jobs garner the lowest ROI, at 47.6 percent (down from 54.9 percent year-over-year).

The reason for the sweeping decrease in ROI isn’t immediately obvious, but Remodeling magazine’s editor-in-chief (and manager of the report) Craig Webb notes that it’s likely related to the strength of the housing market currently.

“It’s not clear if…nationwide affordability concerns are leading (real estate) pros to question the value of renovations that would make a house even more expensive at resale,” says Webb.

However, a silver lining from the report relates to when the data was compiled. Remodeling magazine put all the cost information together before the country was struck with several natural disasters, including massive forest fires and several hurricanes. Since then, building supplies and the price of skilled labor has increased, but that’s expected to change over the course of 2018. As a result, expect to see the ROI of most of these projects level out by the end of the year.

Despite these events, some longtime trends continued through the new year. Remodeling is still far more cost-effective than replacement, but, according to real estate pros, replacing is still the way to go. This year, there’s a 20-point difference in ROI: 76.1 percent for replacement jobs, versus 56 percent for remodeling.

Nationally, when it comes to renovation ROI, curb appeal still wins out. Here are the top five projects with the greatest ROI in the report’s “midrange” cost category:

Manufactured Stone Veneer (97.1% ROI)

• Average Cost: $8,221
• Average Resale Value: $7,986

Entry Door Replacement (Steel) (91.3% ROI)

• Average Cost: $1,471
• Average Resale Value: $1,344

Deck Addition (Wood) (82.8% ROI)

• Average Cost: $10,950
• Average Resale Value: $9,065

Minor Kitchen Remodel (81.1% ROI)

• Average Cost: $21,198
• Average Resale Value: $17,193

Siding Replacement (76.7% ROI)

• Average Cost: $15,072
• Average Resale Value: $11,554

The top five projects with the greatest ROI in the report’s “upscale” cost category are:

Garage Door Replacement (98.3% ROI)

• Average Cost: $3,470
• Average Resale Value: $3,411

Window Replacement (Vinyl) (74.3% ROI)

• Average Cost: $15,955
• Average Resale Value: $11,855

Window Replacement (Wood) (69.5% ROI)

• Average Cost: $19,391
• Average Resale Value: $13,468

Grand Entrance (Fiberglass) (67.6% ROI)

• Average Cost: $8,591
• Average Resale Value: $5,809

Bathroom Remodel (56.2% ROI)

• Average Cost: $61,662
• Average Resale Value: $34,633

Nationally—and on the complete other end of the spectrum—here are the five projects with the lowest ROI in the “midrange” cost category:

Backyard Patio (47.6% ROI)

• Average Cost: $54,130
• Average Resale Value: $25,769

Master Suite Addition (56.6% ROI)

• Average Cost: $123,420
• Average Resale Value: $69,807

Major Kitchen Remodel (59% ROI)

• Average Cost: $63,829
• Average Resale Value: $37,637

Bathroom Addition (59.9% ROI)

• Average Cost: $44,717
• Average Resale Value: $26,769

Deck Addition (Composite) (63.6% ROI)

• Average Cost: $17,668
• Average Resale Value: $11,239

The five projects with the lowest ROI in the “upscale” cost category are:

Master Suite Addition (48.3% ROI)

• Average Cost: $256,229
• Average Resale Value: $123,797

Major Kitchen Remodel (53.5% ROI)

• Average Cost: $125,721
• Average Resale Value: $67,212

Bathroom Addition (54.6% ROI)

• Average Cost: $83,869
• Average Resale Value: $45,752

Bathroom Remodel (56.2% ROI)

• Average Cost: $61,662
• Average Resale Value: $34,633

Grand Entrance (Fiberglass) (67.6% ROI)

• Average Cost: $8,591
• Average Resale Value: $5,809

The 2018 Cost vs. Value Report compares, across 149 markets, the average cost of 21 popular remodeling projects with their average value at resale one year later. Average resale value is calculated based on estimates provided by real estate professionals. View the full report, including project descriptions and city-level data, here.