Cost vs. Value for large remodeling projects

2011-12 Cost vs. Value: Big-Bang Remodeling Projects
Find out which remodeling projects will provide the biggest bang for your buck this year, according to Remodeling magazine.

Optimizing the use of space in a home will not only attract buyers but also give sellers more bang for their buck, according to Remodeling’s “2011–12 Cost vs. Value Report,” conducted in cooperation with REALTOR® Magazine and NAR’s HouseLogic.com.

An attic bedroom addition costing $50,148 was expected to recoup 72.5 percent of the cost nationally—inching up 0.3 percent from the 2010–11 report. The minor kitchen remodel also fared well, returning an estimated 72.1 percent of the nearly $20,000 job cost.

The report looks at the estimated cost and expected resale return of 35 midrange and upscale remodeling projects in 80 markets. The estimated costs and returns were derived from a survey of more than 3,000 REALTORS® conducted last summer. As in past years, REALTORS® picked exterior projects to recoup the most at resale. Among those, new fiber-cement siding was expected to provide the highest return, recouping an estimated 78 percent of the $13,461 cost.

Top 6 Returns
Siding Replacement (upscale) - fiber-cement
Job Cost: $13,461
Resale Value: $10,493
Cost Recouped: 78%

Entry Door Replacement - steel
Job Cost: $1,238
Resale Value: $903
Cost Recouped: 73%

Attic Bedroom Addition
Job Cost: $50,148
Resale Value: $36,346
Cost Recouped: 72.5%

Kitchen: Minor Remodel
Job Cost: $19,588
Resale Value: $14,120
Cost Recouped: 72.1%

Garage Door Replacement
Job Cost: $1,512
Resale Value: $1,087
Cost Recouped: 71.9%

Garage Door Replacement (upscale)
Job Cost: $2,994
Resale Value: $2,129
Cost Recouped: 71.1%

Remodeling’s

2011-12 Cost vs. Value Report ©2011 by Hanley Wood, LLC. Republication or redissemination of the Report is expressly prohibited without written permission of Hanley Wood, LLC.“Cost vs. Value” is a registered trademark of Hanley Wood, LLC.Visit www.costvsvalue.com for information on all 35 projects. There, you can also download a free PDF providing information on average cost and resale value nationally, regionally, and in a specific market. Estimates for construction costs were compiled by HomeTech Publishing.

What’s Behind Falling Housing Inventories?

Home prices are increasing across the country as the number of homes for-sale continues to fall. But at a time when buyer demand is picking up, why is inventory still so low?

Inventories fell to 1.82 million at the end of last year, a 21.6 percent drop from one year earlier, the National Association of REALTORS® reports.

The Wall Street Journal recently highlighted several reasons behind the dropping inventories, including:

Sellers hesitant to sell: About 22 percent of home owners with a mortgage are still underwater, owing more than their home is currently worth. Home owners don’t tend to sell unless a life-changing event occurs when they’re underwater because they don’t want to take a loss on the sale of their house. CoreLogic data shows that inventories are the most constrained in areas with the highest number of underwater borrowers.

Not enough equity to trade up: Often times, home owners rely on the equity from their home to make a down payment on their next home. With fewer home owners seeing equity in their houses, they may not have enough money to move into a pricier home, which is constraining the would-be “trade up” buyer from moving.
Investors continue to snatch up properties: Investors are snapping up properties, but they’ve changed their strategy from past years, which is also constraining inventories. Now they’re holding onto properties and turning them into rentals instead of rehabbing properties and flipping them for profit. This is keeping fewer homes on the market.

Banks are slowing down foreclosures: Banks have new rules to meet with the foreclosure process, and it’s causing them to move at a slower pace in foreclosing on homes. Banks also are showing a preference for short sales and loan modifications, which are curbing the number of foreclosed homes on the market.

Builders are doing less building: Housing starts were at record lows from 2009 through 2011 so there’s less inventory being added to the market. A rebound in the new-home market has only recently started to occur.
Source: “Six Reasons Housing Inventory Keeps Declining,” The Wall Street Journal (Jan. 22, 2013)

An Upbeat Forecast for HousingThe housing market has bottomed out and should show solid improvement, especially next year, top economists said at the International Builders’ Show in Las Vegas.

The National Association of Home Builders expects construction of single-family homes to surge nearly 22 percent in 2013 to 650,000 units and spike 30 percent to 844,000 in 2014, said chief economist David Crowe.

Starts of multifamily units should rise 22 percent to nearly 300,000 this year, followed by a more modest gain of 6 percent in 2014.

Freddie Mac expects residential sales to climb 8 percent this year as mortgage rates remain below 4 percent, according to chief economist Frank Nothaft. And home prices could increase between 2 percent and 3 percent this year, he adds.

Still, builders remain concerned about the rising cost of building materials, gridlock and uncertainty in Washington, the stagnant job market, and ongoing issues with home appraisals.

2007 Mortgage Relief Act Gets Extended for One More Year

Congress passed a bill,The American Taxpayer Relief Act of 2012 (Sec. 202) which extends the Mortgage Forgiveness Debt Relief Act through December 31, 2013. This legislation extends dozens of other tax cuts that have expired or are set to expire at the end of the year, including one that extends homeowners’ ability to deduct the cost of mortgage insurance on a qualified personal residence.

Under the federal tax code, all types of forgiven debt are treated as income, subject to regular taxes. Because of the Mortgage Forgiveness Debt Relief Act, homeowners who get their mortgage debt forgiven through either a short sale or loan modification won’t be taxed on the amount forgiven up to $2 million.

At this popint in time the CA version has expired on 1/1/2013