The home resale market has picked up in the last few years, with prices very nearly recovering all the ground they lost during the great recession. The home remodeling market is recovering as well, and is now a $300 billion industry, according to the Joint Center for Housing Studies of Harvard University.
Why are people still hesitant to buy, but ready to sink more money into their old house? Part of the reason is because the percentage of existing homes available for sale is near an all-time low, so there aren't many choices if you want to move to a new home. But also more people, including retirees, are beginning to appreciate their old home, which may be in a better location – closer to town, in an established neighborhood – while still recognizing that the old place may need some work.
The average renovation pays back about 65 percent of its cost if you sell your house soon after the remodel is completed, according to a Remodeling Magazine survey of real estate professionals. But the amount of payback varies widely, depending on the type of improvement. Here are five home improvements that are likely to pay off:
1. Replace the front door. You know what they say about first impressions, and so improving the entrance to your home makes an outsized difference in the way someone looks at your house. Replacing an old, squeaky front door that lets a draft blow through the front hallway offers a great bang for your renovation buck.
2. Replace the garage door. A bright new garage door, for a relatively modest cost, gives your house a brand new face to the world. According to the Remodeling Magazine survey, a new garage door returns almost 90 percent of its cost when you sell your house.
3. New siding. Once again, it comes down to curb appeal. New siding not only makes your house look better, but it also promises to cut down on future maintenance issues. Modern vinyl siding is fade resistant and typically comes with warranties covering over ten years. Fiber cement siding and manufactured stone veneer are more expensive, but offer a high quality look that many future buyers will appreciate.
4. New windows. Upgrading your windows offers a solid payback for the same reasons as replacing a front door – new windows brighten up your home and improve insulation, cutting down on drafts and saving utility costs.
5. Kitchen upgrade. Modern families spend most of their time in the kitchen, and so an investment to improve the look and functionality of this popular room is typically a good one. The key: buy good quality appliances and solid kitchen cabinets. But don't go overboard. While the special wine cooler, high-tech trash compactor and supersize refrigerator may seem very special, few home buyers actually want to pay for them.
However, not every home improvement will significantly increase the value of your home. Here are two expensive upgrades that may not be worth the cost:
1. Bathroom upgrade. Perhaps it's counterintuitive, but bathroom upgrades are among the improvements offering the lowest payback, returning barely 50 percent of what you spend. Perhaps it's because bathrooms are small, and you don't spend much time there, so people are not willing to pay. Bathroom remodels are also expensive, especially on a square-foot basis, and simply may not be worth the high cost.
2. Room addition. Whether it's adding on a family room, a bedroom or any other room, the payback for this improvement tends to be disappointing. Again, probably because the cost is so high, it's hard to recoup all the dollars that flew out the window. Lower-cost improvements typically offer better payback than major renovations. And improvements to the outside of the house that brighten up curb appeal tend to pay back better than interior improvements offering more subtle upgrades.
No matter what you do, don't "overimprove" your house. It doesn't make sense to spend $100,000 on a new kitchen renovation if your house is only worth $300,000, or if your house only has one bathroom. And while adding insulation may pay back well in the Northeast, it will not add as much benefit where the climate is more moderate.
Before you decide on any renovation, look at your house with a critical eye. What aspects of your house are important? What are its drawbacks? Fix the drawbacks, and focus on the important items.
Selecting your spot
When you no longer need to live near your job, a world of possibilities opens up. Relocating can sometimes save you money if you can find more affordable housing and lower your tax bill. Residing near friends and your children and grandchildren can also play a role in your retirement happiness. And you are finally free to move to a place with better weather and the amenities that suit you best. Here are some characteristics of a great place to retire.Housing built for aging
Housing built for aging
You will be able to maintain your independence longer if you select a home with age-friendly features. A few simple upgrades to your home, such as handles or a seat in the shower, can help to prevent injuries, but in some cases a larger move is necessary. Homes with a bedroom, bathing and laundry facilities on a single level with a no-step entry are generally the easiest for older people to navigate.Good public transportation
Good public transportation
There may be a time when you need to give up driving. At that point public transportation becomes essential to maintaining your independence. A few cities have reliable train and bus services for people of all ages. Some communities also provide low-cost taxi or van services just for older people. Make sure you will be able to get around town without driving a car.Nearby health care
Nearby health care
You're likely to use more health care services as you age. Living in close proximity to a doctor, pharmacy and major hospital can make it easier to receive medical care and comply with a treatment plan. Think about how far you will need to travel to receive medical care to treat ongoing conditions or in an emergency.A good economy
A good economy
A part-time job is increasingly becoming standard in retirement years. If continuing to work is part of your retirement plan, make sure any place you are considering has a strong economy and job opportunities in your field.Your nest egg stretches further.
Your nest egg stretches further.
You don't want to spend your retirement years worrying about your next house payment and scrambling to make ends meet. Aim to retire in a place where you can comfortably cover your bills and have a little bit left over for fun. It helps if the local community has a library and senior center or sponsors free activities such as concerts and movie nights.Year-round weather you can tolerate
Year-round weather you can tolerate
Many people dream of an escape from cold, snowy winters. But before you head south, make sure you can tolerate the often sweltering summers. Spend a few months or even a year in a new place before you make a permanent move. Renting for the first year makes it easy to move on if a community is not a good fit.Opportunities to socialize
Opportunities to socialize
Without a job to go to every day, you may lack opportunities to leave the house and socialize. Some communities have senior centers that plan activities or meals that give older residents opportunities to stay engaged with others. Volunteer work is another way to meet new people and serve the community.Help with chores and maintenance
Help with chores and maintenance
Maintaining your home gets more difficult as you age. Cutting grass and shoveling snow can be labor intensive, and even changing light bulbs gets more dangerous. It's important to have someone who can help you with these tasks, whether it's a friendly neighbor or paid help. Some retirees move to apartment buildings where the landlord is responsible for much of the building maintenance.Children and grandchildren
Children and grandchildren
Most older people want to live near their children and grandchildren. That might mean relocating to where your children found jobs or remaining in your current community. Residing in the same city as your relatives can add meaning to your retirement years and be a source of help with errands you would otherwise have to pay for.Amenities for seniors
Amenities for seniors
Whether it's a golf course or mountain views, a great retirement spot should have the things you are interested in doing. This might mean a museum where you can volunteer as a docent or a scenic walking trail along the river. Start to dream about what you will do all day in retirement, and look for a place that provides those opportunities.Read More
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Devon Thorsby | June 5, 2019
Homeowners should not fret, as long as they're prepared for the possibility of a downturn.