Exploring NAR’s Remodeling Impact Report

The 2022 Remodeling Impact Report, published by the National Association of REALTORS® (NAR) and the National Association of the Remodeling Industry (NARI), offers a deep dive into how remodeling projects impact homeowners’ satisfaction and home value. The report combines data from surveys of homeowners, REALTORS®, and remodeling professionals to evaluate the cost, cost recovery, and emotional benefits of 19 common interior and exterior home improvement projects.

Homeowners and renters undertake remodeling projects for various reasons, whether to enhance functionality, upgrade outdated features, or simply refresh their living spaces. This report delves into the motivations behind these renovations, the outcomes achieved, and the increased happiness homeowners experience after completing their projects. It also provides insights into:

• Typical costs of 19 remodeling and replacement projects, as estimated by the National Association of the Remodeling Industry (NARI).
• Buyer appeal for each project, as assessed by REALTORS®.
• Cost recovery estimates for resale, based on REALTORS®’ evaluations.

In 2020, Americans spent a staggering $420 billion on home remodeling. Among NARI members, 90% reported an increase in demand for remodeling work during the COVID-19 pandemic, with 60% noting that the scope of projects expanded to include larger renovations or multiple rooms. While 83% of homeowners would have remodeled regardless of the pandemic, 86% stated that completing one project often inspired them to tackle additional areas of their home.

The primary reasons for remodeling included upgrading worn-out surfaces, finishes, and materials (30%), improving livability and adding features (20%), and addressing a desire for change (16%). Homeowners were overwhelmingly satisfied with the results:

• 84% reported a greater desire to be at home.
• 69% experienced increased enjoyment of their space.
• 57% felt happy, and 39% felt satisfied with their completed projects.

These emotional benefits were reflected in a typical Joy Score of 9.6 out of 10. Additionally, 69% of homeowners felt a strong sense of accomplishment when reflecting on their renovations.

The top benefits cited from remodeling include improved functionality and livability (35%), durable and long-lasting results (22%), and enhanced beauty and aesthetics (14%). To achieve these results, 35% of homeowners hired professionals for the entire job, 28% sourced materials themselves but hired labor, and 22% completed the entire project independently. A smaller group (13%) contributed partial DIY efforts. Some costs were not collected in cases where projects were typically DIY or part of broader renovations.

The report analyzes both interior and exterior projects, offering cost recovery estimates based on numerous variables, including project design, material quality, location, and the home’s age and condition. For consistency, NARI members based their estimates on a hypothetical 2,495-square-foot house (the U.S. average) built after 1981 with no hidden issues. Projects were assumed to use standard or better-quality materials, but not top-of-the-line options, ensuring broad applicability to a range of homeowners.

It’s important to note that the costs and estimated ROI is purely anecdotal.  The numbers in this report come from REALTOR members, not from contractors, appraisers, or statisticians.

Key Broad Conclusions

The Remodeling Impact Report yields a few broad conclusions:

1. Emotional Value: Home remodeling projects often significantly increase homeowners’ satisfaction with their living space, with many projects receiving a perfect Joy Score of 10.
2. Financial Recovery: Few projects recover 100% or more of their costs (e.g., hardwood flooring refinishing and roofing). Most others, such as adding a new primary bedroom suite, typically recover far less.
3. Trends: Energy efficiency, functionality, and modern aesthetics are key drivers for remodeling decisions.

Joy vs. ROI

It is interesting to me that the “joy score” is given such prominence in this report. That’s because it turns out that most home renovation projects don’t pencil out, and that the real reason you – or anyone – should do home renovation work is for your own enjoyment, not because you should expect a positive return on investment.

Thanks in no small part to HGTV “fix and flip” shows, many homeowners and buyers believe that by renovating their homes, they can actually make money by doing so.  That is, they think they can spend $50,000 on a kitchen remodel and boost the resale value by more than the $50K the remodel cost them.

In most cases, it just isn’t possible to add more value to your home than the cost of the improvement project.  There are a number of reasons for that, but primarily it is because in most cases you are replacing a part of your home that already existed.  For example, you already had a bathroom, to replacing it with another bathroom means first removing the considerable value the original bathroom has.  If you spend $35K on a bathroom remodel, the first $14K of that is just replacing the value that your current bathroom already provides  That’s why that $35K bathroom remodel only boosts your home value by about $21K, or ~ 63% of the cost of the new bathroom.

Therefore most renovations are money-losers, but they do bring you more joy and an enhanced quality of life.

Detailed Breakdown of Each Project

Interior Remodeling Projects

Homeowners have a variety of options when it comes to remodeling their homes, and success can be measured in different ways.

NAR introduced the Joy Score to quantify homeowner satisfaction with completed renovations. Several interior projects achieved a perfect Joy Score of 10, including painting the entire interior or a single room, adding a new home office, refinishing hardwood floors, installing new wood flooring, renovating closets, upgrading insulation, and converting an attic into living space. While some of these projects can be done as DIY endeavors, attic conversions are notably among the most expensive to undertake.

REALTORS® also estimated the resale value added by each project, and these figures were compared to the project costs provided by the National Association of the Remodeling Industry (NARI) to calculate the Recovered Project Cost percentage. Among interior projects, the top cost recovery rates were:

• Hardwood flooring refinishing: 147%
• New wood flooring installation: 118%
• Insulation upgrades: 100%

These results demonstrate both the financial and emotional benefits of certain interior renovations, with some projects delivering significant value beyond their cost.

Interior Renovation Cost Recovery Chart. Almost all these projects are money-losers.

1. Hardwood Flooring Refinish

• Cost: $3,400
• Recovered Value: $5,000 (147%)
• Joy Score: 10
• Main Benefit: Durable and long-lasting results.
• Conclusion: Highly cost-effective; adds value and increases satisfaction.

2. New Wood Flooring

• Cost: $5,500
• Recovered Value: $6,500 (118%)
• Joy Score: 10
• Main Benefit: Aesthetic improvement.
• Conclusion: High ROI and strong homeowner satisfaction.

3. Insulation Upgrade

• Cost: $2,500
• Recovered Value: $2,500 (100%)
• Joy Score: 10
• Main Benefit: Improved energy efficiency.
• Conclusion: Breaks even financially and adds functional value.

4. Attic Conversion to Living Area

• Cost: $100,000
• Recovered Value: $75,000 (75%)
• Joy Score: 10
• Main Benefit: Extra living space.
• Conclusion: High satisfaction but significant financial loss.

5. Complete Kitchen Renovation

• Cost: $80,000
• Recovered Value: $60,000 (75%)
• Joy Score: 9.8
• Main Benefit: Improved functionality and aesthetics.
• Conclusion: Expensive but emotionally rewarding.

6. Bathroom Renovation

• Cost: $35,000
• Recovered Value: $25,000 (71%)
• Joy Score: 9.6
• Main Benefit: Better functionality.
• Conclusion: Moderate financial loss, but high satisfaction.

Interior Renovation Joy Score Chart

7. Closet Renovation

• Cost: $6,000
• Recovered Value: $5,000 (83%)
• Joy Score: 10
• Main Benefit: Improved organization.
• Conclusion: Not financially optimal but enhances daily living.

8. Paint Entire Interior

• Cost: $4,500 (varies)
• Recovered Value: Unspecified
• Joy Score: 10
• Main Benefit: Fresh and updated aesthetics.
• Conclusion: Affordable and satisfying.

9. Add New Home Office

• Cost: $20,000
• Recovered Value: $10,000 (50%)
• Joy Score: 10
• Main Benefit: Increased functionality.
• Conclusion: Limited financial ROI but meets post-pandemic needs.

10. Add/Upgrade Laundry Area

• Cost: $14,000
• Recovered Value: $9,500 (68%)
• Joy Score: 9.5
• Main Benefit: Improved functionality.
• Conclusion: Good satisfaction but not cost-efficient.

11. Add New Bathroom

• Cost: $80,000
• Recovered Value: $50,000 (63%)
• Joy Score: 8.2
• Main Benefit: Increased functionality.
• Conclusion: Significant financial loss, modest satisfaction.

12. Add New Primary Bedroom Suite

• Cost: $172,500
• Recovered Value: $100,000 (56%)
• Joy Score: 9.5
• Main Benefit: Additional space and luxury.
• Conclusion: High cost with limited recovery.

Exterior Remodeling Projects

There are numerous approaches homeowners can take to remodeling projects, and even more ways to analyze their successful outcomes.

A Joy Score was calculated for each project based on the happiness homeowners reported with their renovations. Exterior projects with the highest Joy Scores included painting exterior siding, installing new vinyl or wood windows, and replacing new steel or fiberglass doors.

REALTORS® provided estimates of the potential resale value each project would add to the house. Comparing these dollar values to the estimated costs provided by NARI members, a Recovered Project Cost percentage was calculated. For exterior projects, the highest percentage cost recovered was from new roofing and new garage doors, both at 100%. Fiber cement siding recovered 86% of the cost spent, while vinyl siding recovered 82%.

Exterior Renovation Cost Recovery

1. New Roofing

• Cost: $12,000
• Recovered Value: $12,000 (100%)
• Joy Score: 9.2
• Main Benefit: Enhanced durability and aesthetics.
• Conclusion: Cost-effective and valuable.

2. Garage Door Replacement

• Cost: $2,000
• Recovered Value: $2,000 (100%)
• Joy Score: 9.0
• Main Benefit: Improved curb appeal.
• Conclusion: A no-brainer for resale.

3. Fiber Cement Siding

• Cost: $18,600
• Recovered Value: $16,000 (86%)
• Joy Score: 7.9
• Main Benefit: Durable and attractive exterior.
• Conclusion: Financial loss but worthwhile for aesthetics.

4. Vinyl SidingCost: $18,300

• Recovered Value: $15,000 (82%)
• Joy Score: 7.9
• Main Benefit: Fresh exterior.
• Conclusion: Moderate financial loss, decent curb appeal.

5. New Vinyl Windows

• Cost: $30,000d
• Recovered Value: $20,000 (67%)
• Joy Score: 9.6
• Main Benefit: Energy efficiency.
• Conclusion: Costly but desirable for buyers.

6. Steel Front Door

• Cost: $3,150
• Recovered Value: $2,000 (63%)
• Joy Score: 9.5
• Main Benefit: Modern curb appeal.
• Conclusion: Modest financial loss.

7. Paint Exterior

• Cost: $5,000 (varies)
• Recovered Value: Unspecified
• Joy Score: 9.8
• Main Benefit: Improved aesthetics.
• Conclusion: Affordable and impactful.

Projects with the Highest ROI

• Garage Door Replacement (100%)
• New Roofing (100%)

Exterior Renovation Joy Score

Conclusion

The 2022 Remodeling Impact Report underscores the financial and emotional benefits of remodeling. While a few projects deliver outstanding ROI, most others may lead to financial losses but significantly enhance daily life. Homeowners should weigh costs, resale value, and personal satisfaction when deciding on renovations.

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