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Kitchen remodel only 15% of home value?!?

Posted by Adrienne2011 (My Page) on
Sat, Jan 15, 11 at 13:19

Hi there,
We have received a few quotes from kitchen remodeling companies, and the prices are not on target with what I've read (that the remodeling cost should be no more than 15% of the home's value). We know that the appliances, wood floor, tile floor, glass tile backsplash, copper sink, light fixture, etc. will cost approximately 18,000, and the cabinet quotes have ranged from 15,000 to 23,000. The labor is about 18,000. That is somewhere around 55,000 total cost (or more), but the current value of our house is 280,000. I haven't picked out crazy expensive appliances or cabinets, either: GE Profile and Haas, Merillat Masterpiece, and a few other semi-custom maple cabinet manufacturers. I live in Michigan - does anyone know if this is normal?


Follow-Up Postings:

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RE: Kitchen remodel only 15% of home value?!?

Oops - not 280,000 - 180,000!! Sorry. My husband said it's actually more like 185,000, but whatever.


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RE: Kitchen remodel only 15% of home value?!?

Plus don't forget that you have to plan for the total cost to increase by around 20% or even more.


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RE: Kitchen remodel only 15% of home value?!?

Talk to locals. Those so-called rules of thumb are often wildly inappropriate, and wildly...irresponsible, quoted by salespeople. In some neighborhoods, for instance, most of a home's value is in its expensive land. Some nice homes in those neighborhoods are even tear-downs, not because they're not still great in themselves, but because a purchaser would buy the land to build what was wanted; in one of those the percent a kitchen remodel should cost, economically speaking, would be 0. In many newish exurban subdivisions, a cheap little scrap of land will have a comparatively large home with lots of builder-grade bells and whistles constructed on it. Resale will be to people who want a large home more than a well located one; but a remodel would need to know if values are appreciating appropriately, compared with other neighborhoods, as the homes age.

And as neighborhoods have different characters and offerings, so do their potential buyers, who really do look for different things. So, definitely ask people who know your neighborhood and have no economic motive in running the figure up.


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RE: Kitchen remodel only 15% of home value?!?

The 15% guideline is meant to protect you from spending too much and losing if you have to sell soon. You're at about double that now, so it doesn't sound like a good idea at all to spend that much in your area if you ever plan to sell.

There are so many variables of what's "normal" that it's hard to advise on a specific budget even within the same neighborhood. When you go to a full service contractor, you do spend a lot in labor and overhead. Check around and see if there are ways to get the price down.


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RE: Kitchen remodel only 15% of home value?!?

A major kitchen remodel according to Remodeling Magazine data comes out at $58,000. A minor kitchen remodel $22,000. The return on investment at sale 2010 was 68.7% for a kitchen. So, if you spend $55K on your major remodel you are in the ballpark average. You would add around $37K to the value of your house (2010)

So, *if houses are selling in your area, you could expect to add value compared to a new kitchen but you would also lose about $18K of what you put into it. This may vary by your region.

$55,000/217,000 is about 25% of what your houses value would be. I think you would have a hard time doing more than updating for $22,000, which would return about 73 percent or about $16,000

$22,000/201,000 would be about 11% of your houses projected value so you would be in the ballpark, But Minor remodeling seems to be cosmetic updates and new appliances.


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RE: Kitchen remodel only 15% of home value?!?

IMHO, I would move before going through all the expense and headache of a remodel, when it's debatable how much of a financial hit you will take.

Our last home we did some rearranging of the cabinets, painted the oak cabinets, changed out the faucet and sink and put in granite countertops. It looked awesome and we sold the house with a bidding war last January for $500,000.

I would at least go out and look to see what is out there for what you would have invested had you remodeled...I think you will be surprised.


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RE: Kitchen remodel only 15% of home value?!?

How long do you expect to remain in the house? If you have to sell, do you need to get most or all of that 55K back? (for example, to pay off the loan that financed the construction?)

Talk to a real estate agent to see if the updated homes in your area are selling for substantially higher prices. If not, you have to realize that this is money you are spending as a treat for yourself, not as an investment in the value of your home. I agree with Steff that financially this could be a high-risk move. While you are talking to that real estate agent, you should have him or her show you some homes that cost about 60K more than what your current home is worth. You may be able to move into a house with a better kitchen rather than remodel for one.

How many of the high-end items on your list--the copper sink, the glass tile, etc.--are "wants" versus "must haves"? No matter what budget you set, for any given kitchen remodel, you can't always get what you want.


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RE: Kitchen remodel only 15% of home value?!?

I never understood how they come up with that percentage. I mean, is it 15% of the DWELLING or of the entire property?? I think that could be a big difference.


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RE: Kitchen remodel only 15% of home value?!?

In many areas when the real estate market took a nose dive the pricing in the renovation market did not. Cabinets didn't fall in price, nor did the costs of labour, appliances, flooring or any thing else. Are there more deals, probably.
Your question then needs to be -am I doing this for myself and staying here long term (then spend the money), or am I doing this for quick resale (Then just do cosmetic upgrade), and how badly does this need to be done. Will I get a lot of enjoyment and better use of my space.


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RE: Kitchen remodel only 15% of home value?!?

Now, factor in the extra cost of dealing with structural surprises (at least 10% of original estimate but sometimes much more), additional furnishings for the room (paint or wallpaper, rugs, window coverings, pans for the new cooktop, etc.) and the splurges you will take to bring your gear up to the new standard set by the kitchen (tablewear, placemats, dishes, utensils, towels, decorative pieces, wall-hung t.v.).

Then add the ongoing cost of the increase in taxes if the assessor thinks you've done a particularly good job or if the actual space is increased. And unless you've added some stuff to cut the energy consumption of the house, you may find that you've actually increased the energy use because of more lights, more or bigger appliances, more water use, more time spent in kitchen with lights or t.v. on, etc.

Unless your existing kitchen is a real liability to the house, in this economy there's a pretty good chance that a major kitchen tune-up will please you _and_ other people but if the other people are buyers, they won't want to help you pay for it. But, as some have noted here, in this economy if your house and a similar one in same area with a crummier kitchen are both on market for same price, yours will sell first.

I remember an interesting conversation on this forum last year in which someone posted a 1980s kitchen and said, "what should I do to sell this?" The most consistent advice was in this vein: remove one blatantly dated feature over the sink and then clean the kitchen scrupulously, declutter, and put geraniums or something on the back step and some red items inside to continue the theme. Very few recommended buying appliances or cabs, or changing configuration, or messing with the design. The feeling was that the new owner is probably buying as much as he/she can afford already and would budget for the new kitchen down the line.

Michigan has seen a brutal backlash in the housing market, hasn't it? Are you in an area in which higher priced houses have fallen in price severely? If so, you're remodeling to please yourself only. Put yourself in the buyer's shoes: would YOU choose this house over a bigger or more posh one for the same price? Perhaps yes, IF the apparently lesser house is actually more house in some respect, perhaps in design, energy use, drop-dead gorgeousness, unique craftsmanship, or something else.

Our kitchen addition is definitely overdoing it for our neighborhood. We're thinking in terms of "if this house works for us into our 80s, we can save by not moving out as early as we otherwise might." Our early retirement vacation budgets are being sunk into this house. No certainty that our kids will ever make a fortune on it when we're in the old folks home or the cemetery, but it would be nice if our remodel loan were paid off by then.


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RE: Kitchen remodel only 15% of home value?!?

I've never really paid attention to percentage guidelines, so I looked at a few sites and found a range from 10% to 25%. None of the sites I reviewed made any distinction between the total and dwelling only.

The decision has to be a combination of the personal benefits and future value. Using the percentage method as a primary measure is not the right approach.


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RE: Kitchen remodel only 15% of home value?!?

The kitchen and bath industry came up with those percents as guidelines as to what is appropriate from an investment perspective. 10% is considered builder grade like 12.5 would be semi custom and 15% would be custom. But come on the size of the kitchen alone can drive things up or down regardless. I believe those values were dreamed durring an over inflated market. If you have a small townhouse worth 200k the 10% rule is more then enough for a nice kitchen. A town house in another market in TX may go for under 100k. But the size of the kitchen is approx the same.

Here are some good repeatable costs in a reasonable world. Where you are remodeling to improve the condition of the kitchen to get away from builder grade products. For the typical 20-25 lineal feet of kitchen area in town houses starter homes in single family buildings and condos.

$3,250 Appliances

$3,250 GE Hotpoint Line Appliances
$1,750 side by side (stainless looking alloy metal) 36" x 69" Fridge
$500 matching dishwasher
$750 matching gas or elect self cleaning range
$250 matching over the range microwave

$6,000 for cabinets ($300/ft is a number that will get you multiple cabinet companies in plywood box construction dovetail soft close drawers with soft close doors in full overlay with glaze.

$1,000 10 x 10 kitchen is 100 sqft of floor
$10 / sqft is very generous for new tile flooring labor and materials.

$1,700 most common granite colors that are level A or B. most 10 x 10 kitchens are about 35-40 sqft of countertop with 4" backsplash. 40 sqft x $35 + $150 sink and $150 cut out would total.

$1,500 A typical Kitchen Renovation with taking out soffits relocating and replacing lighting new switches outlets plates etc new garbage disposal etc runs around $1,000 to $1,500 for drywall trim paint and electrical things.

$8,000 - $12,000 Labor for project remodeling and supervision. This is a typical budget that I have done 30 times in the last few years in the kitchen and bath business being paid to remodel kitchens in the Washington DC area. More specifically Fairfax and Loudoun Counties which are the two highest income per capita or household in the nation. This makes the typical cost of housing very high in these counties.

The value of the house does not effect the costs of the numbers above. The numbers above are based on the reality of the costs of the products and services.

$23,450 is the total with $10,000 for labor. I had a 4 man crew that I paid 3 guys $15/hour and one $30/hour. We could start and finish any kitchen where the size of the room and the configuration of appliances and plumbing was not changed in 6 days. They would work 10 hours per day. My labor would run $4,500 - $5,000 for a project like that almost like clock work. If I charged $10,000 I would have made $5,000 before adminstrative and govt regulation hidden costs.

If I sold the cabinets I would make aprox $1,500 on the cabinets. I also double dipped on this example for flooring as i counted the labor for it in the $10/ per sqft.

Your prices you list are not low end prices for your project in the labor or the materials. A copper farm sink will generally be a $1,000 or more. My impression is you have more expensive taste then you care to realize. I can do these numbers in any city in any state in the US.

The 10-15% rule is intended to give guidelines on when you are spending to much where you are throwing money away when life forces you to leave your home. None of us live forever or get to stay in one place. Make your decision wisely and you will be happy.


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RE: Kitchen remodel only 15% of home value?!?

We built this house eleven years ago, and plan on staying here until our youngest (currently in first grade) graduates. The kitchen is nothing but wants - everything works fine and looks acceptable. We don't need any of this stuff, but we want it. Because we are doing this for ourselves, we don't care about ROI. Our philosophy is "you only live once". I was just wondering why the "hard and fast" rule of 15% max would basically only get me... well, not very much, at all. I did find that Remodeling magazine mentioned - it's a free magazine app on my iPad! I've already browsed through three issues, and it's been enlightening. Thank you to all who have responded.


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RE: Kitchen remodel only 15% of home value?!?

In that case, the issue is the starting market value of your home. That same house in Fairfax County, VA might be 500K and the 15% would be 75K. That's why percentages as a rule don't work.


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RE: Kitchen remodel only 15% of home value?!?

I think that before you put a $55k kitchen in your home, you go look at houses that would sell in the $210-$220k range to see what you would get. If your house is worth $185k, then in your market, the $55k would get you a lot more house that will probably include a much better kitchen. I did not put the entire $55k into the house purchase price because you will have expenses in buying and selling, so count on buying for $25k-$35k more.
Our area is a higher priced area, but when I started in real estate 21 years ago, a $185k house was a nice non-starter house while for $210-$220k, people were getting a much larger house, luxury type, in nicer condition and in a better neighborhood. I imagine that is what you'd be facing now. Back then, $20k would give you a really nice kitchen to add on to your $185k house and no one would have ever added much more than that. So, your biggest question should be how you can get as much bang for the potential $55k spent as possible. I'd try to grab a nicer house because trading up in a down market makes the most sense. Interest rates are also amazing right now and so this could be the perfect time.


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RE: Kitchen remodel only 15% of home value?!?

I would expect the interest rates to continue going up for several years, possibly way up. Also housing values to continue to decline for years as more foreclosures are waiting and haven't entered the market and more to come.

Just saying this because the value of your house and the amount you can expect to recoup are changing with the market.


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RE: Kitchen remodel only 15% of home value?!?

The labor is really going to cost. You can move, but in today's housing market, houses are harder to sell, especially houses that need kitchen updates. Plus there's the added costs of delayed maintenance and cosmetic fix ups, realtor fees, etc. The new house in your price range may not have a stellar kitchen either, so staying in place may be more economical.

There are a ton of ways to save on a kitchen, but you have to be willing to put in some work yourself and scale back some major changes if you want to keep your costs within that guideline. An interesting show to watch is 10 Grand in Your Hand, I think it's on the DIYNetwork.

Ways to save might include:
Keeping major utilities in place. They can be upgraded, like extra outlets, etc, but nothing too drastic.

Re-arrange your existing cabinets and add in more where needed.

Repaint cabinets

Check out Habitat for Humanity Re-store & craigslist for used cabinets. I got a whole display kitchen's worth of cabinets plus granite for $1500 on craigslist. I think circuspeanut got previously used cherry cabinets from Re-store.

Ikea cabinets with custom fronts. Ikea's base cabinets and hardware are a great value. Their door styles are limited, but companies like Scherr's will do custom doors to Ikea specs.

Counters - again, check out craigslist & re-store. Seriously, you never know what you might find. In my area, someone was offering Uba Tuba granite slabs for less than $500. It's sad to say, but businesses are going under all the time. Those fancy granite front desks have to go somewhere.

Appliances - check out CL for appliances people bought, but couldn't use due to color or size. Best Buy and Sears have scratch 'n dent. I've gotten many appliances at the Sears outlet over the years. A ding on a range side flanked by cabinets will never be seen. Also check out the fancy showrooms. Everyone's business is slowing down, you might be able to negotiate a discount if you buy 3 appliances from one place.

Walls - paint them yourself and tile your own backsplash. Yeah, it might take a pro 8 hours and you 2 weeks to finish it, but you'll save on these really easy jobs.

Check overstock.com for deals on hardware, fixtures, sinks, glass tile, lights and more. They ship for $2.95. Sometimes you can even get free shipping. Check for ads on the back of kitchen or design magazines for a 10% off coupon.

Floors - try Lumber Liquidators or even Costco for hardwood. Again, I can't say it enough, try craigslist. I see a lot of flooring on there where maybe too much was ordered or the customer changed their mind. Know exactly how much sq ftge you need plus extra for your space.

Shop around and look at different contractors. In my area, we found a company that does home remodeling. They don't do flat sum bids because someone always ends up losing money or on quality of materials. This company charges for labor and materials. They estimate the hours on a particular job, say 6-8 hours to complete plus estimate materials, and give a high/low range. They don't upcharge on materials, so you don't end up paying $50 for a $5 outlet. They break down all the materials used, charge one trip fee of $10, and provide copies of all the receipts for the materials purchases. If the job takes less time to complete, they only charge for hours worked. It's a great system.

Check this board, some of us have fallen victim to a kitchen frenzy, buying things that we fall out of love with or can't use due to limitations on space, or just plain go in a different direction. You might be able to score some great finds.

In short, do your homework and do the legwork. You'll get a kitchen you love, for less.

It's always my personal goal to improve a kitchen and have the value it adds exceed the amount paid. I'm hoping my current kitchen looks like a $30K kitchen, but we only paid $10K.

Good luck!!!


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RE: Kitchen remodel only 15% of home value?!?

There was a thread a few months back called "The price of kitchens in the age of uncertainty." Many folks, myself included, thinking about these issues.

We were on track to an $80K plus kitchen and for several reasons changed strategies. Bt doing all the work (except tile) ourselves and by re-making our old ("antique") cupboards, we will have saved enough to splurge on the materials and appliances we want but still come in around $30K. That's still a lot but feels right, both the expense level, and keeping/restoring the original cabinet fronts.


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RE: Kitchen remodel only 15% of home value?!?

Renovating is a money losing process. Especially in today's economy. The most important thing to figure out is if you can afford it. The percentage rule is an average, and, individually speaking, none of us are average.

All houses end up needing money put into them, especially in repairs and maintenance. A renovation is money poured in on top of that. People may have made money house flipping in the 90's, but no more.

A house is a place to live, not an investment. So, it helps to think about renovation costs in terms of what you can afford and what you want.

A brief history of housing is in the article I linked. It's very interesting stuff!

Here is a link that might be useful: Why your home is not the investment you think it is


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RE: Kitchen remodel only 15% of home value?!?

Adrienne2011 - You said:

...We built this house eleven years ago, and plan on staying here until our youngest (currently in first grade) graduates. The kitchen is nothing but wants - everything works fine and looks acceptable. We don't need any of this stuff, but we want it. Because we are doing this for ourselves, we don't care about ROI...

If you're really being honest about this - and nothing could gum up the plans (like a job transfer) - and you can afford it - fine. Even though it makes no sense economically.

I think like you. My husband and I built our house 15 years ago - knowing - except for something like if one of us died - we'd be here a long time. And we did things that were totally non-cost-effective for our neighborhood. Like building a house that suits 1 or 2 adults - plus perhaps 1 child - in a neighborhood that has lots of families with lots of kids. No family room and formal living room. Just a "great room". Putting in $25k worth of kitchen cabinets in a rather small (but cook friendly) kitchen. In our last place - we ripped out the whirlpool tub and installed a huge shower (no tub at all). Everyone said - no no - no one will ever want to buy your place. But we sold our last place to a nice couple who didn't like bath tubs either. And - when we eventually wind up selling this place - I'm sure we'll find a buyer too.

About the only concern I'd have is the nature of the place you live - and the economy there. And your neighbors. My BIL and wife live in Brighton (near Detroit). I think their house is worth about what yours is worth. And considering the feel of their neighborhood and their neighbors these days (we were there in 2009 - perhaps things are better now) - I'm not sure how such an expensive kitchen remodel would sit with them. Or if you care for that matter. I live in a gated community of 1100 houses in north Florida where places now run about $400,000 to $4 million - and no one would feel I was being "uppity" or "flaunting it" if I did what you were doing. They would probably just think me behind the times for buying a new white double oven to match my "white on white" kitchen. What - no SS :)? Anyway - this is a question I'm in no position to answer for you. Just thought it might be food for thought. Regards, Robyn


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RE: Kitchen remodel only 15% of home value?!?

The article in Doonie's post is especially interesting because it was written BEFORE the downturn--spring of 2007. This was a very perceptive writer who was warning us, even if we only saw that the interest rates were over 6 percent and the housing market was still in the bubble stage. Remember the events of the next year and a half? We're going to feel the reverb of those times for much of our future lives. Every time I listen to an analyst discuss the housing market, there's a warning of more foreclosures lying ahead. Additionally, sociologists now say that the "new household" rate is in decline, meaning that the number of potential buyers continues to decrease. People are living with relatives, roommates, grown children instead of living separately. Potential divorces are awaiting sufficient funds to fuel them.


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RE: Kitchen remodel only 15% of home value?!?

I live in an area where the norm is 30-40 year old kitchens and anything less than 20 years old is considered new. If you live in an area with a lot of new construction then I second the move and get all the other perks that come with a higher end house, not just a kitchen. Otherwise I think I'd stick it out with the 11 year old kitchen, as it has a lot of life left in it being that "young" and must have some appeal to you design wise as you're the original builder of the house. You could probably fund that 1st grader's Harvard education with the interest that 55K could make (probably more like 60K with the unforseen stuff. :-)


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RE: Kitchen remodel only 15% of home value?!?

Your proposed renovation costs are pretty high for your area and home value, regardless of the "guideline". This is an upper end remodel in a working class neighborhood. It's not recoupable. It's an expense. It's not a needed repair or replacement for something non functioning. It's a luxury.

It's like you're buying a new nice SUV. If you're OK paying cash, and it will haul all of the stuff you need hauled everywhere and give you decent value on the fuel milage, then choosing a luxury SUV over a 20K (+yearly difference in fuel costs) Hyundai wagon that will do the same job is 30K worth of unnecessary expense on luxury. People choose to do this all the time. But, if your financials are OK to spend that extra 30K without any hurt, and it couldn't do a more important job elsewhere (such as that college fund) then it's your choice to spend it. If you keep either vehicle for the next 12 years, the resale at the end of that 12 years won't be appreciably different and you'll have gotten some utilitarian transport out of the luxury auto experience.

You have a functional, although basic kitchen. If you want to update what you have, you can do that for much less than 50K. If you have to borrow a single cent to do this project, then that's the time to really examine where your head is on the issue, because none of the numbers make economic sense to do with anything but pure discretionary cash. 12-15 years down the road, this brand new stylish kitchen will be an out of date used kitchen that needs updating as well. Is that 12-15 years of luxury use worth the additional 30K over a "spruceup" of painting what's there, new appliances, and new counters and knobs? You're not correcting a non functional layout. You're merely addressing "wants".

We all have our own personal guidelines and budgets as to how we indulge ourselves. My indulgences involve good quality dark chocolate and parts for old Corvettes. Someone else's on a smaller budget might involve a trip to the museum on the free day and a single mocha latte at their favorite coffee shop. Yours might involve a prosumer range and copper sink. It's all about needs vs. wants vs. budgets vs. compound interest vs. carpe diem. If someone else came in here with the same dilemma, but stated that they had terminal bone cancer and this was their one wish before they died, the expense vs. payback would be viewed much differently than maybe someone with 2 kids struggling to make ends meet on 30K a year.

You have to examine what spending this amount will actually DO for you. And some of that will be intangible. So, that's why only you can judge if it's appropriate.


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RE: Kitchen remodel only 15% of home value?!?

**That same house in Fairfax County, VA might be 500K and the 15% would be 75K. That's why percentages as a rule don't work.**

No, that actually illustrates why it does work. It works because in Fairfax County it is NOT economically risky to spend $75,000 on your kitchen, whereas in Michigan it is.

That's what the 15% rule is for: to protect you from economic risk (i.e. losing a ton of money). It assumes that you are looking at your house in part as an investment, i.e., that it matters to you that all this money doesn't just disappear--that you want a good chunk of it back whenever you sell. If you're happy sinking $75,000 into your kitchen with the knowledge that you will never get that money back on resale--if you can wave goodbye to that much money without regrets because you're economically secure and will enjoy the new kitchen so much that it's worth it--then the 15% rule doesn't apply to you. The rule that applies to you in that case is, "How much money can I safely and happily kiss goodbye in order to get a kitchen that I love?"

As for when you sell, the 15% rule also probably assumes that you're going to move (i.e. sell) when the average American moves. That is, it assumes that whether you're currently planning to or not, you will end up moving within the next seven years. (The average American family moves every seven years.) It must be assuming that, for two reasons: (1) blanket rules that supposedly apply to everyone have to be calculated based on the average person; and (2) remodeling projects that are more than seven years old don't boost your resale value as much as a more recent remodel would--in fact, if they're done in a faddish way, they get dated quickly and become more of a minus than a plus.


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RE: Kitchen remodel only 15% of home value?!?

No, that actually illustrates why it does work. It works because in Fairfax County it is NOT economically risky to spend $75,000 on your kitchen, whereas in Michigan it is.

It would definitely be risky to spend $75K on the kitchen of a $500K house in Fairfax County. There are a lot more factors to consider than the base value of the house. Location and condition are a big consideration. $500K doesn't go that far in many Fairfax County neighborhoods and will get you a modest sized fixer. If the house is in an area where buyers aren't willing to pay for upgrades then it's risky to spend that much on just the kitchen. If the house is already at the top of the neighborhood range. If the homes in the neighborhood aren't at the age where most kitchens need or are being upgraded. All of those make it risky. Our friends just put around $35K into their kitchen prior to putting their house on the market there and it didn't increase the listing price of the house at all. Imagine if they had spent $75K.


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RE: Kitchen remodel only 15% of home value?!?

Here's that previous thread...begun by sayde...well read by many...

Here is a link that might be useful: The price of kitchens in the new age of revised expectations


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RE: Kitchen remodel only 15% of home value?!?

Thanks for reposting that thread, Florantha. It does a good job of attacking the problem from all angles.

A house is the most expensive thing most of us will ever own. I'd never written checks as large as the ones I wrote to my GC. Glug. Glug.

Anyway, all important points. OP and potential renovators need to consider all the salient points. There is no one size fits all answer and that is what makes it difficult.


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RE: Kitchen remodel only 15% of home value?!?

"A house is a place to live, not an investment"

TOTALLY untrue. Otherwise everyone would rent, and even then it would be a good investment for one side! Real Estate has always been a good investment over the LONG haul in the U.S.

You cannot take the last 5 years and look at it under a microscope look over and 10-20 year period and you;ll see a historical annual average appreciation of around 4%.

ideagirl - your analysis is way off base. A $75k kitchen is chump change in Grosse Point, Bloomfield Hills or parts of Harbor Springs. Granted, in most of MI it's a poor bet, and steff has pointed out the flaw in your VA analysis.


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RE: Kitchen remodel only 15% of home value?!?

Antzz, I respect your opinion, but I have trouble with adverbs like "TOTALLY". In multiple choice tests, it's rarely the correct answer;)

This is not a black and white issue. What one has the potential to recoup over the long haul depends on which 10 to 20 year period you look at.

Also, an increase in home value doesn't necessarily equal profit. There are multiple costs in home ownership. With the typical 30 year mortgage, the owner may end up spending double the original cost of the home. For instance, a 30 year mortgage at 6% interest on a $100,000 price, will end up costing $215,842. So, even if the house does appreciate in value, the interest costs and maintenance costs and property taxes have the potential to consume any perceived "profit".

The article I linked below also has some interesting points given our current times...

Here is a link that might be useful: Interesting New York Times Article


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RE: Kitchen remodel only 15% of home value?!?

That average price appreciation you mention - 4% (don't know whether it's true but I'll assume it is) doesn't cover the cost of owning a house. Basic rule of thumb is a house costs about 10% of cost/value (which may be very different these days) annually. You have to count the cost of debt (or the money you're not making on any equity you have in the house) - taxes - maintenance - repairs - etc.

On my part - I like to own. I tend to stay in places for a long time (3 places since 1973) - and I don't want some landlord telling me I can't do this - that - or the other thing. But my husband and I live off our investments (we're retired) - and the idea that our places have been "investments" - as opposed to "consumption items" is kind of laughable to me. About the only person I know who got a big bang for his buck in residential real estate was my father. Who bought prime waterfront property in south Florida in the 60's. A 4 year old 2200 sf foot house for under $70k. He sold it at the height of the real estate boom (November 2005) for $1.5 million - after doing virtually no work on it for almost 40 years (he wasn't a real estate genius - my mom died that year). It was a tear down - and the new 5000+ sf houses going up around him were in the $2-4 million range. Of course - all of that came to a halt with the building bust (this is our third since we moved to Florida in the 70's).

FWIW - our house is worth maybe $600k. It's 15 years old. And will probably need a new roof - a paint job (interior and exterior - have done interior before but it will need a "redo") and new flooring in about 5 years. I think we'll be lucky to do this for less than $50-75k (new roofing codes in Florida are very very expensive in terms of compliance). But we'll have to. Not because we'll want to - but because we don't want our house to start falling apart. Fun job - no. Essential job - yes. And I'd never spend $50k redoing our kitchen. Robyn


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RE: Kitchen remodel only 15% of home value?!?

Perhaps a better way to think if it is while a house is an investment, it is primarily a place to live. For a while, people were making it their only investment.


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RE: Kitchen remodel only 15% of home value?!?

There are a lot of very good, informative points here, and I am grateful for the education. I must confess utter ignorance regarding the statement "the kitchen remodel should not cost more thn 15%"... I originally thought that meant that I should be able to remodel my kitchen for approximately 15% of my home value. I did not realize it was a cutoff point to protect the homeowner from over-investing in his or her home.
:o)
My husband and I improve our home in some way every year, so we won't get sick of living in the same house for twenty years. I wouldn't move even if the market was great, because I adore my neighbors. I've done all my own (extensive) landscaping. We have put so much of ourselves into our home, that moving is unthinkable. We have a 15 year fixed mortgage, and want to pay it off before we sell.
I think those are all excellent reasons to stay and improve the functionality and asthetics of our kitchen.


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RE: Kitchen remodel only 15% of home value?!?

Adrienne, We had the same type situation. We poured money into our house because we wanted to enjoy it. I am fairly certain we will never be able to recoup our expenses, but we love our location and we love our new spaces. And we feel comfortable with how we financed it.

Appraisers, who seem to drive the amount of money a bank will lend for a mortgage, are tied to the comparables in your area. If you are like us, and spend more than that 15%, you probably won't be able to recoup it. (At least I wouldn't hold my breath!) Our appraiser couldn't give us any credit for the quality of our finishes. Basically it was sq. footage and comparables, of which there weren't really any for what we did.

So, hopefully this whole discussion has helped you in your journey;) We are all TKO on this site and there is a ton of valuable help to be found. As my GC said, anything can be done in a kitchen...for a price!


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Contemplate this: under-water mortgages

Curmudgeon time again folks. I don't think we've had a soul-searching conversation for a while and it's always important to keep prudence in mind.

I thought I'd revive this thread after reading an article in today's business page: here in Minneapolis-St Paul area, 17% of mortgages are "under water" (owe more than the house is worth) but the depth under water is on average $38,000, which is apparently a lot less than in some other places.

Nationwide, the average is 23% of all residential properties with a mortgage were in "negative equity" at the end of the first quarter of 2011. Average was $65,000. Holy cow! New York underwater average is $129,000. Ohio has lowest underwater average amt at $31,000.

Percentage of under-waters: Nevada 63%; Arizona 50%; Florida 46%; Michigan 36%, California 31%

This is a terrible climate for spendy home improvements, it would seem to me. Time to paint, clean the gutters, gussy up the yard, and pay your mortgage off early I would think.
____

Be sure to look at the thread about remodeling in a time of uncertainty--referenced above.


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RE: Kitchen remodel only 15% of home value?!?

Pat789 revived a thread addressing a perennial issue in this forum, giving me the chance to chime in with our experience remodeling during the Great Recession, which is when this thread began.

We had the same concern as the OP about how much to spend when we loved our location and knew we would not have to move because of the nature of DH's employment. But the recession turned so much conventional wisdom about home ownership and remodeling on its head, it was scary. Finally, in late 2009, we bit the bullet.

Like any investing, it is hard to time the market. But it turned out, for us, that prices for materials and labor were slightly lower than expected because of the recession. We also had an easier time scheduling and had access to the best in the trades. We got a great kitchen and some other beautiful spaces, deluxe value for the money.

Yes, we spent more than we could recoup if we had to sell right now, but it was our cash and it was spent where workaholic DH and wife get to enjoy it every day. Looking back, we tend to think we overpaid when we bought the house in the heating up market of 2004, like everybody did, not for our remodel.

Who knows what any house will be valued at in 2034?


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RE: Kitchen remodel only 15% of home value?!?

Just my opinion, but putting 55,000 in a 180,000 house seems like a lot. Of course, I know kitchen remodels are very expensive and the costs do add up. Resale value is mainly determined by location, location, location as they say. What are the values of the homes in your area, what kind of kitchens do they have? So many variables come in to play. Its hard to say what the resale/market will be in another 10 yrs or so. You have to decide what you can afford, and what is most important to you. If you want your kitchen, can afford it and aren't worried about recouping the expense someday, then go for it. If you are worried about resale, in 10 yrs yours will not be a new kitchen any longer, still nice of course, but styles change and it might not be the kitchen buyers are looking for. (Remember the honey oak of the 80's and 90's? Now everyone is trying to update their honey oak, including myself!) And yes, the costs of remodeling are always higher than you expect, things come up (electrical issues, plumbing, carpentry issues) always something to drive up the cost.


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