Home improvement is a broad term that includes renovations, repairs and other projects performed to improve the overall look and feel of a home. The industry includes the sale of building materials, appliances and decor as well as contractors and tradespeople. Home improvements can add value to a property and enhance the enjoyment of a home, but it is important to understand that not all projects will have the same return on investment.
The COVID-19 pandemic spurred many homeowners to invest in their houses, and the industry benefited greatly from the upswing. However, the renovation boom appears to be cooling off. Harvard University’s Joint Center for Housing Studies’ latest Leading Indicator of Remodeling Activity suggests that homeowner spending on home improvement projects will fall this year, though it remains strong at the moment.
A few key areas where homeowners may see the best return on their investments are in energy-efficient upgrades and home security systems. In addition, some simple fixes such as replacing worn doorknobs, cleaning out rain gutters and repairing sidewalk cracks can make an impact on the curb appeal of a house.
When it comes to more major home improvement projects, the ROI can vary significantly depending on the type of work performed and its cost. Generally, the more upscale the project, the lower the ROI will be. Some projects that tend to recoup less of their costs include kitchen and bath renovations, basement finishes and adding a master suite.
Whether you are planning to sell your home soon or are simply looking for ways to improve its functionality, the most effective projects are those that appeal to the broadest range of potential buyers. Improvements that are too personalized or do not fit with the style and value of other homes in your neighborhood could actually detract from the value of your home when it comes time to sell.
The prevailing wisdom is that home improvement projects should be paid for with cash, as opposed to taking on debt or using credit cards. This is because credit card debt is not tax-deductible, while the interest on loans is. However, even if you plan to remain in your home for a long time, it is a good idea to save up some money for future improvements, as the market fluctuates and unexpected events could pop up.
It is also recommended to do your homework before hiring a contractor. Ask for references from previous customers, and always check out a potential contractor’s license and insurance. Homeowners should also consider working with a contractor that is a member of a trade association or accredited by a professional organization. This will ensure that your contractor is properly licensed and insured, in case of any unforeseen incidents during the project. In addition, it will help to minimize any possible disputes over payment. Lastly, be sure to get an estimate for the entire project before starting any work. This will help to prevent any unexpected expenses down the road.