The Value of Kitchen Remodeling in a Soft Market

"Luckily, today's 'normal' is good news for home owners and real estate practitioners"

- Kermit Baker, Director of the Remodeling Futures Program
at the Joint Center for Housing Studies at Harvard University

By Carl Kuttler, Kuttler Kitchens, Pinellas Park

When the housing market is down, homeowners considering a move – but with no urgency to sell - often opt to wait and look at ways to improve their existing home. Because it is one of the most utilized rooms in the home, the kitchen is traditionally the remodeling priority.

Whether it is a minor face lift or a total kitchen remodeling, the inevitable question is "Will I get my money back when I sell my house?"

Not surprising is that Remodeling Magazine and REALTOR® Magazine have a perspective. In their most recent Cost vs. Value Report*, they show that, after several years of high appreciation, the current downturn in the home sale market represents a return to "normal" and is no reason for alarm in remodeling. In fact, the numbers on remodeling in general - and kitchens in particular - are holding strong in the Bay Area compared to other parts of the country.

According to the report and a Harvard studies expert, when you consider its value at resale, a home improvement project costs only 20 to 25 cents on the dollar. The other 75 to 80 cents spent on a project goes directly back into the home through increased value. "Luckily, today’s ‘normal’ is great news for home owners and real estate practitioners," said Kermit Baker, Director of the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University, when commenting on the report.

In the Tampa Bay Area, the report shows that, in kitchen remodeling, the cost recovery ranges from 78% to 94.2%, depending on the nature of the upgrades and relative cost of the job. That means the balance – 5.8% to 22% – is the homeowner’s cost for the pure enjoyment of the improvement.

Breaking it Down

Here is how the Remodeling Cost vs. Value Report breaks it down for our local market, which shows that we are comparable to, or ahead of, national averages.

For mid-range kitchens, a minor remodeling that costs $17,419 has a resale value of $16,457 (94.5%) and a major kitchen remodeling that costs $52,106 has a resale value of $40,565 (78%). For an upscale kitchen, a kitchen remodeling costing $105,508, the resale value is $99,348 or a 94.2% recovery, well above the 75.8% national average.

One Bay Area REALTOR® who represents buyers and sellers throughout the Tampa Bay Area gives a practical view of the kitchen remodeling question. According to Patty Clark of Century 21 R.E. Champions in Madeira Beach, home buyers care most about are the big three - price, condition and location. "For the first time, price and condition go together," she said.

"In today’s market, for a house to sell, it has to have a competitive edge, which means it has a lower price or great amenities," she said, noting that kitchens and bathrooms are what a homebuyer notices first.

Of the three, "the kitchen is the heart of the home," she said. It is the one room where you spend the most time. All things considered - price, location, surroundings and competing properties – the kitchen is an all-important selling feature. "It can represent a higher return on investment because it is an area of higher expectation by the buyer."

That translates into the "Wow" factor that comes with kitchens and baths that have updated amenities and features such as an open floor plan, angled counter tops, warm tones, wood cabinets, quality workmanship and energy saving appliances, she said.

Custom Kitchen Design for the Right Reasons

Clark views a home as an expression of the individuals who live there, which puts the intangible value on home improvements. "I like to see homeowners making improvements for their own enjoyment, not necessarily in anticipation of selling the house." That’s what really creates a home, she said.

Clark’s viewpoint speaks directly to the enjoyment factor mentioned in the Cost vs. Value Report. With a cost recovery of a remodeled kitchen between 78 to 94.5 cents on the dollar, the balance is the gratification factor. According to Clark and the Cost vs. Value Report, it goes directly to home enjoyment. To many, that could be the same as money in the bank, especially if you plan to spend more years in your home. If resale is an immediate need, a kitchen remodeling could give your home the competitive edge in today’s market. Either way, it’s an option many are turning to, even in a soft market.