2023 Cost vs Value Report
James P- Jan 7, 2024
- 11 min read
Updated: Feb 17, 2024
2023 Cost vs. Value Report for Major Home Renovation Projects
Minor Kitchen Remodel | Midrange
Job Cost $26,827 - $27,966
Resale Value $18,780 - $20,929
Cost Recouped 70.0% - 74.8%
In functional but dated 200-square-foot kitchen with 30 linear feet of cabinetry and countertops, leave cabinet boxes in place but replace fronts with new shaker-style wood panels and drawer fronts, including new hardware. Replace cooktop/oven range and slide-in refrigerator with new energy-efficient models. Replace laminate countertops; install mid priced sink and faucet. Add new resilient flooring. Finish with painted walls, trim, and ceiling.
Major Kitchen Remodel | Midrange
Job Cost $79,534 - $80,695
Resale Value $29,635 - $30,984
Cost Recouped 37.3% - 38.4%
Update outdated 200-square-foot kitchen with functional layout of 30 linear feet of semi-custom wood cabinets, including 3x5-foot island; laminate countertops; and standard double-tub stainless steel sink with standard single-lever faucet. Include energy efficient energy efficient range, vented range hood, built-in microwave, dishwasher, garbage disposal, and custom lighting. Add new resilient flooring. Finish with painted walls, trim, and ceiling.
Major Kitchen Remodel | Upscale
Job Cost $157,669 - $164,263
Resale Value $45,871 - $49,106
Cost Recouped 29.1% - 29.9%
Update outdated 200-square-foot kitchen with 30 linear feet of top-of-the-line custom white cabinets with built-in sliding shelves and other interior accessories. Include stone countertops with imported ceramic- or glass-tile backsplash; built-in refrigerator, commercial-grade cooktop and vent hood, wall oven, and built-in microwave unit. Install high-end undermount sink with designer faucets and water filtration system. Add new general and task lighting, including low-voltage undercabinet lights. Install tile or similar flooring that looks like wood.
Bath Remodel | Midrange
Job Cost $24,221 - $25,468
Resale Value $16,029 - $14,746
Cost Recouped 66.4% - 57.9%
Update existing 5x7-foot bathroom. Replace all fixtures to include 30x60-inch porcelain-on-steel tub with 4x4-inch ceramic tile surround; new single-lever temperature and pressure-balanced shower control; standard white toilet; solid-surface vanity counter with integral sink; recessed medicine cabinet with light; ceramic tile floor; vinyl wallpaper.
Bath Remodel | Universal Design
Job Cost $40,334 - $41,470
Resale Value $18,869 - $17,551
Cost Recouped 46.8% - 42.3%
Update existing 5x7-foot space to be wheelchair-accessible (zero threshold, 36-inch-wide door) and install flat-panel electrical switches at sitting level (36 to 42 inches above floor). Replace toilet with comfort height fixture featuring elongated bowl and bidet-type seat. Remove existing bathtub and install curbless, tiled, walk-in shower with adjustable showerhead, fold-out seat, thermostatic mixing valve, and bi-directional glass door. Replace flooring with electric radiant heat beneath new luxury vinyl tile flooring. Install adaptive living vanity with easy-grasp handles and adjustable mirror. Install LED lights, infrared ceiling light, night light, and ultra-quiet vent fan with humidity-sensing controls. Install ceramic tiles on walls with two contrasting color stripes. Install nine towel bars that can support 250 pounds and reconfigured storage to be accessible from a seated position.
Bath Remodel | Upscale
Job Cost $76,653 - $78,935
Resale Value $27,815 - $24,971
Cost Recouped 36.3% - 31.6%
Expand existing 35-square-foot bathroom to 100 sf within existing house footprint. Relocate all fixtures. Include 42x42-inch neo-angle shower with ceramic tile walls with accent strip, recessed shower caddy, body-spray fixtures, and frameless glass enclosure. Include freestanding soaker tub with high-end faucets; stone countertop with two sinks; two mirrored medicine cabinets with lighting; a compartmentalized commode area with one-piece toilet; and a humidistat-controlled exhaust fan. Use all color fixtures. Use larger matching ceramic tiles on the floor, laid on diagonal with ceramic tile base molding. Add general and spot lighting including waterproof shower fixture. Cabinetry has custom drawer base, wall cabinets. Extend HVAC. Electric in-floor heating.
Bathroom Addition | Midrange
Job Cost $56,437 - $59,544
Resale Value $16,260 - $15,195
Cost Recouped 28.8% - 25.5%
Add 6x8-foot bathroom over crawlspace with poured concrete walls. Use cultured-stone vanity top with molded sink; standard chrome faucets; 30x60-inch white fiberglass tub/shower with ceramic tile surround; single-lever temperature and pressure-balanced faucet; white low-profile toilet; general and spot lighting; electrical wiring to code; mirrored medicine cabinet; linen storage closet or cabinet; painted trim; ceramic tile floor.
Bathroom Addition | Upscale
Job Cost $104,681 - $109,300
Resale Value $25,693 - $25,766
Cost Recouped 24.5% - 23.6%
Add new 100-square-foot primary bath to existing primary bedroom over crawlspace. Include 42x42-inch neo-angle shower with ceramic tile walls, accent strip, recessed shower caddy, body-spray fixtures, and frameless glass enclosure. Put in freestanding soaker tub with high-end faucets; stone countertop with two sinks; two mirrored medicine cabinets with lighting; a compartmentalized commode area with one-piece toilet; and a humidistat-controlled exhaust fan. Use larger matching ceramic tiles on the floor, laid on diagonal with ceramic tile base molding. Add general and spot lighting and waterproof shower fixture. Cabinetry has custom drawer base, wall cabinets. Extend HVAC. Electric in-floor heating.
Key Trends in the 2023 Cost vs. Value Report
This year's report, in which average project values fell sharply to their lowest levels ever, shows us what projects maintain a premium to homebuyers when times are tough.
True to form, this year’s report confirms a consistent truth that has been revealed on every report for the last 30 years: Exterior replacement projects typically provide a higher return on investment than interior discretionary remodels at the time of house sale.
National perspective. Sorted by the highest return on investment, this table ranks all 23 projects in the 2023 Cost vs. Value report.
The value figures are derived from a survey of more than 6,000 Realtors. The survey supplies them with project specifications and cost estimates, along with photos and illustrations describing the projects, and asks for each remodeling project: “What value does this project add to the sale price of a home?”
The reason for high returns on exterior projects stems from what real-estate professionals regularly witness from buyers: If their first impression is a run-down exterior, they tend to enter the property wary and reluctant to spend large on the property. If, on the other hand, the home looks well taken care of, they enter with a more positive view from the outset.
This year, there are two exceptions to the rule that exterior projects rate higher: a minor kitchen remodel and a midrange bath remodel. The report suggests the average seller can expect an 86% return on a light touch to the kitchen, and 67% on a modest bathroom reno. Here, too, the rationale stems from how buyers are likely to feel, especially in today’s tight economy. Buyers are hyper-focused on hanging onto extra cash right now, especially if buying a house has put a big dent in their savings. They want workable kitchens and baths and don’t necessarily want to take on an interior remodel before they move in.
Larger discretionary projects, such as upscale kitchen, bath, and primary-suite remodels, don’t influence the value of the home nearly as much. That’s because a “dream kitchen” or “luxury bath” conceived by a former owner may not include the finishes and selections that all buyers will value highly. There are vast differences in aesthetic tastes; one person’s elegant new kitchen or bath will not be viewed by all prospective buyers equally. These discretionary projects do have great value for the owners who make the selections, reflecting a different kind of value—the satisfaction in living in their dream home. This underscores an important point: The CVV report is specifically about establishing just one type of value—the dollar value at the time of sale. Remodelers often describe using the CVV report to open a discussion about budget for proposed projects. It can be reassuring to many prospective clients to know what a project might return if they must sell their property. Once the investment has been established, remodelers report having an easier time talking about other values a proposed project might have for clients.
The Hottest Trend
The HVAC conversion project. This project details removing an oil or gas furnace and replacing it with an electric heat pump that is appropriate for the climate zone. The CVV report shows that not only is this a popular project, but it also offers an exceptionally high return on investment (104%).
The trend toward home electrification has been gaining momentum in recent years. According to recent Energy Information Administration (EIA) data, electricity has surpassed natural gas as the largest residential energy source, with space conditioning accounting for the highest proportion of home energy use.
The EIA also reports that a growing proportion of the electricity generated in the U.S. is coming from renewable sources. Expanding this proportion while reducing fossil fuel emissions is viewed as a viable solution to reducing greenhouse gas emissions and alleviating climate change. However, climate warming is not the only issue driving the push toward electrification. Energy independence, which the war in Ukraine has brought into sharp focus, is also a growing concern for which electrification offers a solution.
Independent from global problems, heat pumps have grown in popularity because they provide both heating and cooling. The conversion from a furnace or boiler to a heat pump provides the added value of summertime cooling without a separate air conditioner. New inverter technology has also made heat pumps viable for heating in northern states, erasing the discomfort problems that previously plagued their use in cold climates.
Historical perspective. This chart shows trends based on 15 projects that have always been included in the report. This year, both costs and values fell for the first time since 2012, with the average project value falling sharply to its lowest level since the report began. This grim outlook likely arose from falling home prices and rising mortgage rates faced by Realtors in Q4 2022 when they were surveyed.
A Roiling Economy
The most noticeable trend in the 2023 CVV report has been the plunge in the overall ROI numbers. While the projects with the highest returns have edged over 100%, those at the lower end of the ROI range have dropped well below 50%, with the overall cost–value ratio down to 34.8%, the lowest in the history of the report. The previous low for the CVV (a ratio of value over cost) was 56.8% in 2011–12, on the heels of the Great Recession.
Todd Tomalak, who leads Zonda’s Building Product Research and Advisory Practice, reminds us that, for the 2023 CVV report, Realtors were surveyed in Q4 2022 at what was unquestionably the nadir of the real estate market. Mortgage rates were rising while inflation was surging, and real estate sales were falling. “It was the darkest hour of 2022 and for real estate in a decade,” Tomalak explained. “But it provides an important perspective to capture. We learn what projects maintain a premium to homebuyers when times are tough, and they can’t afford everything on their wish list.”
Regional perspective. A look at the regional averages (sorted to match the “National Averages” table for highest ROI) shows the influence of local market variations. The table reveals some wide market fluctuations, likely driven by a combination of resolving supply chain backlogs plus housing markets cooling at very different rates.
The chart above showing regional variations reveals wide differences in cost and value (one startling example is the entry door replacement project). Tomalak believes these fluctuations are likely driven by a combination of resolving supply-chain backlogs plus housing markets cooling at very different rates—a sign of a turning market where not all the markets are at the same stage. “We have seen this sort of pricing data emerge several other times; it is usually a phenomenon that occurs in ‘inflection’ points around business cycles (in this case, the housing cycle),” Tomalak explains. “The volatility that we are seeing in building product costs (and housing) since 2020 had more outliers in price/cost data than any time over the last 70 prior years cumulatively.” Tomalak says this has occurred at other times when there were severe whipsaws and product shortages (he cites WWII, the 1910s, and the 1920s as examples). These were markets where the fundamentals of supply and demand were distorted in some major way, and thereby the range and volatility of pricing were markedly inconsistent, Tomalak says.
What the Numbers Mean
The projects in the Remodeling Cost vs. Value Report are speculative. 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 the extremes in variations in pricing that many markets have experienced in recent years. Some of this variation is due to the effects of pandemic and supply-chain disruptions, and the imbalanced effect of these and other economic challenges in different regions. High demand for skilled labor continues to dampen production. 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 cannot be applied accurately to an individual remodeling project for a particular address. Resale value is 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-estate professional about home prices in the neighborhood.
Methodology
Cost. To estimate costs, the Cost vs. Value (CVV) team first set a baseline cost by creating a price index for each project category. These indices were based on specific building-product data from the Bureau of Labor Statistics (BLS), including the Consumer Price Index (CPI) and the Producers Price Index (PPI), as well as data from the Personal Consumption Expenditures (PCE) price index, produced by the U.S. Bureau of Economic Analysis (BEA). We also used BLS data to account for changes in average wages for installers from 2019 to now, and accounted for the change in overall inflation within the building product categories. Each of these was given a proportional weighting to establish a reliable national baseline that accounted for changes from 2019 (pre-pandemic to avoid anomalies created over the last few years) to present.
To define how prices varied for local markets, the CVV team partnered with Verisk (Nasdaq: VRSK), a leading global provider of predictive analytics and decision-support solutions, who provided us with building cost data for each of the 23 remodeling projects drawn from XactRemodel, Verisk’s remodeling estimating solution.
Value. 2023 Cost vs Value Report: Resale value data for each project was aggregated from estimates provided by an online survey conducted by Zonda to over 6,000 Realtors working in cooperation with the National Association of Realtors (NAR). Survey respondents were provided with project descriptions, photos and illustrations, plus construction costs and median home prices for each city, and asked “What value does each of the 23 remodeling projects add to the sale price of a home?” Respondents were instructed to avoid making judgments about the motivation of the homeowner in either the decision to undertake the remodeling project or to sell the house.
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