Remodeling Magazine's 2008-2009 Cost vs. Value Report, produced each year in conjunction with Realtor Magazine, contains good news about the value of remodeling projects.

The recent Cost vs. Value Report showed that renovations on a nationwide basis held their value better than home prices did in 2008. According to the National Association of Realtors (NAR), home prices declined 7 percent in 2008, while the value of homeowners' investments in remodeling dropped only 2.8 percent in 2008.

During slow real estate cycles, many would-be sellers postpone their move and remodel instead. This makes sense as long as the projects are selected carefully for maximum return on the investment. It's important to avoid renovations that would overimprove the property for the neighborhood.

One benefit of remodeling sooner rather than just before selling is that the homeowner is able to enjoy the improvements before moving on. All too often, sellers wait until right before they put their home on the market to enhance its appeal.

HOUSE-HUNTING TIP: Remodeling, if done smartly, can result in a quicker sale and less negotiation with buyers over perceived shortcomings. Painting the house and updating the kitchen, baths, lighting fixtures and floor coverings are examples of improvements that can improve the sale price.

In today's slow economy, there are more contractors looking for work in some areas. And, in some cases, their prices have come down. This positively affects the return on investment when the home is sold.

Recently, an Oakland, Calif., homeowner received a bid of under $20,000 for a midrange kitchen remodel. Four years ago, he received a $45,000 bid for the same work, but decided against going ahead with the project because of the cost. Now that he's ready to sell, he's planning to do the midrange kitchen remodel to enhance the salability of his home.

The amount of return from a remodel investment that is recouped when the property is sold varies significantly from one place to the next and from project to project. For example, nationally, 70.7 percent of the cost of a major kitchen remodel was recouped at sale.

In the Pacific region (Alaska, California, Hawaii, Oregon and Washington), a major kitchen remodel returned 95.5 percent. In San Francisco, a major kitchen remodel returned 131.5 percent of the investment at sale. Despite higher labor and material costs, The Pacific Coast average cost recouped at sale was 14.8 percent higher than in the rest of the country.

Smaller cities such as Jackson, Miss., and Billings, Mont., had high rates of recovery due to lower labor and material costs.

 

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