Whether it’s midrange or upscale projects, the 2016 Cost vs. Value report offers plenty of good news for replacement contractors.
The annual report compares average costs for 30 popular remodeling projects with the value those projects retain at resale in 100 U.S. markets and breaks them down into Midrange and Upscale projects.
Once again, replacement contracting jobs took the top five spots in both categories, save for the fifth slot in the midrange category where minor kitchen remodel came in. Overall, replacement jobs averaged a return of 61.5%, compared to remodeling projects at 57.3%. Even though replacement jobs once again bested remodeling, the gap between the two shrank this year to just 4.2%, likely reflecting the hotter housing market.
Here’s a look at the top five projects in each category by national averages of replacement value:
- Attic insulation: 116.9%
- Manufactured stone veneer: 92.9%
- Garage door replacement: 91.5%
- Entry door replacement (steel): 91.1%
- Minor kitchen remodel: 83.1%
- Garage door replacement: 90.1%
- Siding replacement (cement): 78.1%
- Window replacement (vinyl): 73.8%
- Window replacement (wood): 72.1%
- Grand entrance (fiberglass): 69.9%
Attic insulation, the top job in the Midrange category, is all new this year. Experts say its entry at no. 1 reveals the big trend driving most replacement jobs: energy efficiency.
“Consumers are very concerned about energy efficiency, and it’s rather inexpensive compared to other remodeling work to improve energy efficiency with attic insulation,” said Bill O’Donnell, president of RemodelMAX. A publisher of estimating tools for remodelers, RemodelMAX used Clear Estimates remodeling software to generate cost estimates for the report.
It’s nice to see attic insulation “getting the respect it deserves,” said Michael Kwart, executive director of the Insulation Contractors Association of America. Kwart said 40 percent of existing homes are candidates for insulation upgrades. He pointed to a Harvard study showing 40 million homes in need of better insulation, including just about any home built before 1980 when most codes called for R19 insulation. Today, most states require at least R38. Sweetening the pot even more, federal tax credits have been extended to cover 10% of insulation costs up to $500.
But even though the market is potentially huge, Kwart cautioned against contractors jumping into insulation work. With all the training, expertise and distribution involved, “You’ve got to be doing a couple hundred homes to make it worthwhile,” Kwart said.
When it comes to windows and doors, the same drivers — and the same caveats — are at play. “Windows and doors are always at the top of the replacement list because there’s a payback,” said Jeff Lowinski, Window and Door Manufacturers Association vice president of tactical services. “It’s not just aesthetics.”
Again the market to upgrade the nation’s windows to better energy efficiency is potentially massive. The Environmental Protection Agency estimates there are still 1 billion single-glaze windows in America, Lowinski said. The marketplace currently only sells 60 million windows a year, he added.
Lowinski echoed others in recognizing that contractors can use the Cost vs. Value Report to show potential customers why they should invest their money in a contracting job rather than something else.
“The homeowner has a choice as to where they’re going to put their money,” he said. “Of the 10 or 20 projects on that list very people can afford them all. So where do you put your money? In your kitchen countertops or your windows? This report gives the answer.”