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Determining a realistic budget can be one of the most daunting aspects of embarking on a home renovation project. Perhaps that’s why nearly a third of renovating homeowners don’t set a budget at all, and why the same share exceeds an established budget, according to a new survey from online home remodeling and design platform Houzz, where I am an economist and researcher.
It can also be hard to know what expenses are reasonable and which ones may be exorbitant. While numerous factors determine the cost of home renovation projects, examining national trends and data on average spending can give you a sense of what your project might cost. The following figures from the 2016 Houzz & Home Report can help you think through your own remodeling budget.
Size and value
The size of the home you plan to renovate is an important driver of cost. For instance, homeowners renovating a home under 1,000 square feet spent $25,000 on their projects on average in 2015, while those updating a home that was 2,000 to 2,999 square feet spent more than twice as much ($58,000).
Renovating homeowners on Houzz also spent 20% to 25% of their home value on average in 2015 for homes under $200,000, and 10% to 15% for homes exceeding $200,000. For example, homeowners with a home value of under $100,000 spent $19,700 on average on 2015 home renovations, while those with a home value of $750,000 to $1 million spent $101,600 on average.
Project and scope
But the cost of interior remodels varies drastically by room type. Kitchens tend to be the most expensive — yet also the most popular — interior remodeling project. About 30% of renovating homeowners on Houzz have focused on kitchen remodels now for five years in a row. Bathrooms are not far behind, both in cost and popularity, followed by living rooms and then other rooms in the home.
Still, remodeling costs vary widely by room size and project scope. For example, a major remodel of a large kitchen (200-plus square feet), where at least all cabinets and appliances are replaced, ran $50,700 on average nationally in 2015. A major remodel of a smaller kitchen (under 200 square feet) was about half as much ($26,400). Less comprehensive remodels were significantly less expensive, at $17,800 and $9,400 on average for large and small kitchens, respectively.
For master bathroom remodeling, tackled by a fifth of renovating homeowners on Houzz in 2015, again scope and room size matter. A major remodel of a large master bathroom (100-plus square feet), where at least the cabinetry, countertops, and toilet are replaced, ran $25,600 on average nationally in 2015. A major remodel of a smaller bathroom (under 100 square feet) ran about $12,000. These averages are cut roughly in half when remodels are more minor in nature.
Other interior remodels tend to be much less expensive. A non-master bathroom remodel will cost $7,800 on average for a large bathroom (50-plus square feet) and $4,200 for a smaller one, across projects of all scopes. Living or family room remodels tend to be the next most expensive project, averaging $6,500 and $3,800 for a large (350-plus square feet) and smaller room (under 350 square feet), respectively. All other rooms — such as bedrooms, home offices, laundry rooms, entryways or mudrooms, dining rooms and closets — typically range between $2,000 and $4,000 for large rooms and $1,000 to $2,000 for smaller rooms.
Determining the priority areas of your home can help focus your renovation spend, and being realistic about the scope and size of the project will help ensure your satisfaction with the finished product, without sacrificing your budget.
If you’ve recently purchased a home and are planning to renovate, consider padding your budget, as recent homebuyers tend to invest more in their renovation projects ($66,600 on average) when compared with all other renovating homeowners ($59,800 on average) and those planning to sell their homes ($36,300 on average).
Recent homebuyers are bigger spenders because they focus on more expensive comfort-enhancing projects, such as kitchen and bathroom remodels, window replacements, insulation upgrades, home system replacements like HVAC systems or automation for things like thermostats, electronics and lights. Meanwhile, those preparing a home for sale tend to focus on less costly, appearance-enhancing improvements, such as repainting the home’s exterior or replacing decking.
On the other hand, older homeowners, age 55 or older, tend to spend three times as much as homeowners who are under age 35 on average ($73,300 vs. $24,500, respectively). One of the key reasons for this difference is that an overwhelming majority of these older homeowners want to stay in their homes for the foreseeable future and are creating dream homes that fit their retirement needs.
Local home values
It’s also important to note that renovation costs vary significantly across regions, mainly driven by differences in the cost of labor, among other factors. And since wages are highly correlated with the value of homes in a given area, higher home value areas will inevitably lead to higher renovation costs. Talking to professionals in your area early on in the renovation process will give you an idea of regional costs. However, it is still useful to assess the general value of homes in your neighborhood to give you a rough idea of an investment level that your area is able to support.
Considering local home values can help you ensure that you aren’t better off just buying an already remodeled home — or, in other words, that you are not over-investing in your own home. For example, let’s say you’re planning to renovate your home to reinforce its foundation and walls, replace the roof, and update the kitchen and bathroom. If your home is valued at $300,000, the renovation would cost over $200,000 and most homes in your area cap out at a value of $500,000, you may want to consider whether it would make better financial sense to simply purchase a home that is in better condition.
Worth the effort
Ultimately, knowing your own needs and desires will go a long way toward setting your renovation priorities, while being realistic and thoughtful about your budget will ensure that your finished project fits your initial vision — and is worth the effort.
Nino Sitchinava is principal economist at Houzz, a residential remodeling and design platform and community.