Recent Data Suggests You Shouldn’t Spend Another Dime on Home Improvements Before Speaking With a Local Real Estate Agent
Lighter Side of Real Estate • June 14, 2023
If you do renovations or home improvements to your house, common sense says that doing so would raise the value, right?
The good news is that they do increase the value of your house!
The not-so-great news is that the amount your home goes up in value probably won’t be as much as you even spent on the project…
In fact, as CNBC recently reported, according to the 2023 Cost vs. Value Report, only 4 home improvement projects produce a positive return-on-investment. And if that’s not surprising enough, they probably aren’t even ones you’d think would make the list! The current projects that will net you the most profit when you sell your house are:
- Switching out a traditional furnace to a heat pump. That’ll put an extra $619 in your pocket based upon national averages.Replacing your garage door. That will add $116 to your bank account.
- Replace your siding with a stone veneer. Add $192 to your balance sheet.
- Change out your front door with a new steel door. Treat yourself to some lunch with the $21 you’ll recoup.
If you combined all four of those exact home improvement projects, you can expect to net a whopping $948!
The big, sexy projects most people think about doing to improve value — like a full-blown renovation of an existing bathroom or kitchen — will certainly add value, but they won’t increase the value as much as they cost to do. Those types of projects recoup less than 50% of what they cost a homeowner.
That said, those are based upon national data and averages. Here’s a link to the data CNBC cited in their article, which allows you to choose your specific area to get a better idea for how much you can expect to recoup on a project where you live. But the general gist is always the same: Very few projects will produce a positive return, regardless of where you live. And when they do, it’s rarely all that much of a return.
Should You Even Update or Renovate Your House at All?!
Once the initial shock wears off, the next question most homeowners have is whether they should waste any time or money on improving their house at all. But before you decide to never spend another cent or minute of your time on your house, here are a few things to consider:
- Updates and renovations will make your house more attractive and appealing to potential homebuyers.
- An outdated house (or one in need of repairs) can bring your value down. You need to maintain your house to about the level of other homes in the area, if you want to fetch a similar price to other recently sold homes.
- If your home isn’t updated, it can take a longer time to sell, or not sell at all, if it’s a slow market.
So you still need to make sure you’re keeping your house in good shape, and improving it over the years, if you want your house to sell readily and for as much as possible.
Things to Do and Keep In Mind if You Renovate
In order to maximize the money you spend on home improvements, here are a few key things you should do:
- Speak to a local real estate agent before doing any projects. Basing your decision upon national (or even regional) data can be misleading and inaccurate. Just because a particular type of project tends to produce a better return, and another does not in most areas, that might not be the case in your specific price range and market. A local agent will be able to help you assess whether or not a project will improve the value of your home enough to make it worth the investment.
- Don’t underestimate the value of your enjoyment. While a project may not produce a positive financial return, that doesn’t mean it won’t give you great satisfaction and enjoyment. There’s nothing saying you have to make money on the projects and home improvements you do, so long as you know what to expect ahead of time and aren’t surprised when you decide to sell.
- Be frugal and thoughtful about what you spend on improvements. New and updated is better even if it isn’t the highest end finishes or materials. Unless you’re in the luxury market, you can probably get away with doing lower-grade upgrades if you’re concerned about making as much of your money back as possible.
- Keep it neutral and universal. If you’re concerned about recouping as much money as possible, try to do projects and updates that will appeal to almost every buyer by keeping them neutral in style and color.
The Takeaway:
Many homeowners are surprised that their home renovations and improvements don’t increase the value of their home as much as they hoped, or even as much as they cost to do, when they decide to sell their house. But the reality is, very few projects produce a positive return-on-investment, and it isn’t very much of a return when they do.
If you want to maximize your ROI on home improvements, make sure to speak with a local real estate agent to help you assess whether a project makes sense before you spend time and money on it.
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The 10 Best Markets for First-Time Buyers This Spring For a while, buying your first home hasn’t just felt hard. It may have felt out of reach. Not because you weren’t ready . Not because you weren’t trying . But because every time you ran the numbers, they didn’t work . That’s why so many first-time buyers stepped back. But after years of sitting on the outside looking in, this Spring could give buyers like you an opening again – especially in some markets. Metros Where Buyers May Have an Easier Time Breaking into the Market Zillow just released a list of the top 50 metros for first-time buyers this Spring. And here’s a quick snapshot of the top 10 (see chart below): According to Zillow, in these top-ranked markets, median-income households can afford 68% of all homes for sale . Let that sink in. Not long ago, it felt like you could barely afford anything. Now, you may actually have some options again. That doesn’t mean every home is suddenly going to fit your budget. But it does mean the door that felt closed for so many buyers is starting to crack back open. And in a number of cities, first-time buyers may finally be getting a shot at buying . Why This Is Starting To Open Up These cities are rising to the top not because of any one big change, but from a few smaller ones finally lining up. As Orphe Divounguy, Senior Economist at Zillow, explains: “ First-time buyers are finally seeing some light at the end of the tunnel. Affordability is still a challenge, but rising incomes, stabilizing prices and improving inventory are creating real opportunities in parts of the country. In the strongest markets for first-time buyers, they'll find more choices, less competition and a clearer path to homeownership than they've had in years .” Basically, three big things are working in your favor: More homes are hitting the market. Realtor.com says inventory is up 8.1% compared to last year. That gives you more choices, less pressure, and more chances to find a place that fits your budget. Price growth is moderating, so homes aren’t moving further out of reach as quickly. Some may even be falling back within your target price point. Incomes are rising. If you make more money, that can offset some of the affordability challenges too. And even though mortgage rates have been higher lately, that combination can still make a difference. As Mark Fleming, Chief Economist at First American , explains : “Income growth has outpaced house price growth for 19 straight months, boosting house-buying power even as mortgage rates remain elevated.” How To Find the Opportunities in Your Local Market But what if your city didn’t make the top 10 list, or even the top 50 markets? Here’s what you really need to remember. There’s going to be opportunities in every market, if you know where to look. Even in the same city, two buyers can have completely different experiences. And a big part of that is who they choose as their partner. The right agent knows how to find pockets of opportunity in any market. That could mean: A neighborhood where prices haven’t climbed as quickly A part of town with more inventory, or A new build community offering incentives so builders can sell their inventory So, even if your city didn’t make the list, that’s okay. There’s still an opening for you, you just need your agent to help you find it. Bottom Line For a long time, first-time buyers have felt stuck, waiting for their turn to buy. But for some buyers, this Spring might be the first time in a while where things start to feel more within reach again. Want to see which neighborhoods could give you the best shot at buying right now? Let’s talk.
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3 Must-Do’s for First-Time Home Buyers Buying your first home is exciting, but it can also be a little nerve-wrecking because it’s something you’ve never done before. And trying to think of everything you need to do can feel like a lot. But here’s the key. You don’t have to figure everything out on your own. And you don’t have to do it all at once. Just tackle it one thing at a time. Here’s a simple list of 3 main things you should focus on to help you get started. 1. Assemble Your Team: Don’t Do This Alone Buying a home is a team sport. And having the right professionals by your side can make a world of difference. Here’s who you need to find: A local real estate agent is your guide from the first showing to closing day. They’ll make sure you understand all the details along the way, so you feel confident in your decision. A trusted lender will walk you through loan options, monthly payments, and what’s realistic for your situation. That information is something you’re going to want early on. 2. Prep Your Finances: Set the Foundation First This is what determines what you can afford, how competitive you’ll be, and how confident you’ll feel when it’s time to make an offer. Here’s how to get ready: Check your credit score. Your credit score impacts the loan options you’ll qualify for and even the mortgage rate you’ll get. Knowing this number early gives you time to work on raising your score, if you want to. Save for your down payment and closing costs. Most buyers focus on the down payment , but closing costs matter too. Having savings set aside for both helps you avoid last-minute stress and surprises. Look into assistance programs. Many first-time buyers qualify for programs that’ll give their homebuying savings a boost. This can make buying possible sooner than you expect. Talk to a lender about mortgage options. Fixed-rate, adjustable-rate, FHA, VA , and conventional loans all work differently. Understanding the options helps you choose what fits your goals best. Get pre-approved. A pre-approval tells you what a lender would be willing to give you for your home loan. This’ll help you figure out your price range and set you up to move fast when the right home comes along. Figure out your budget. Your mortgage is just one part of homeownership. Budgeting for your utilities, home insurance , and everyday expenses and maintenance will help make sure your payment feels comfortable, not stressful. 3. Gather Your Documents: Save Time (and Stress) When you’re officially ready to kick off the buying process, lenders are going to need to verify your income, assets, and financial history. Having these documents ready-to-go upfront can speed up the process and reduce back-and-forth. Here’s what Bankrate says you need to prep: W-2s and tax documents (past 2 years). These show income stability and help lenders verify your earnings over time. Recent pay stubs (generally the past 1–2 months). Pay stubs confirm your current income and employment status. Bank statements (past 2–3 months). These show your savings, spending patterns, and where your down payment funds are coming from. Investment account statements (past 2-3 months). If you’re using investments as part of your financial picture, lenders may ask for these as well. Copy of your driver’s license. This verifies your identity and is required for loan processing. Residential history (past 2 years). Lenders use this to confirm stability and background information. Statements for any outstanding debts (past 2 months). Student loans, auto loans, and credit cards affect your debt-to-income ratio, so lenders will want to know about them. Proof of supplemental income. Bonuses, commissions, side work, or child support may count toward your income if documented properly. Note: the exact time frames and list of documents may vary lender to lender. This is just a general rule of thumb to help you get the ball rolling. Bottom Line Buying your first home doesn’t mean you have to have everything figured out. It just requires a plan. If you start with your finances, organize your documents, and surround yourself with the right people, you’ll be in great shape when the time comes to make a move. And if you want more information on anything in this list or just need help getting started, don’t hesitate to reach out.
