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The record $233 billion home improvement market represents 40 percent of all residential construction and improvement spending and more than two percent of all expenditures in the U.S. economy, according to Harvard University's Joint Center For Housing Studies.

While "The Changing Structure of the Home Remodeling Industry" extols the virtues of home improvements, it doesn't tell you how not to over do it.

That's because there's no quick measure to determine what constitutes an over improvement.

How much your home improvement gets carried away depends a lot on what job you undertake, what's happening in your neighborhood and, in the end, what the improvement means to you and your family.

Measure cost vs. value

In terms of your home's resale value, the best home improvements are often cosmetic curb appeal and buyer-appeal type jobs -- a new roof, painting, carpeting, minor kitchen and bath re-dos, a kitchen sky light to brighten an other wise bleak room and other alterations and additions that brings your home in line with the others in the neighborhood. Such improvements increase the value of your home virtually dollar-for-dollar.

Otherwise, Remodeling Online's 2004 Cost vs. Value report indicates which larger jobs provide the most return. The percentage return is a national average based on data from 60 cities. Keep in mind, your return begins to diminish over time, typically after the first year, as the improvement ages and gets out of step with contemporary upgrades.

Top 10 Cost Vs. Value 2004
ImprovementReturn
Minor Kitchen Remodel92.9%
Siding Replacement92.8%
Bathroom Remodel Mid-Range90.1%
Deck Addition86.7%
Bathroom Addition, Mid-Range86.4%
Bathroom Remodel, Upscale85.6%
Window Replacement, Mid-Range84.5%
Window Replacement, Upscale83.7%
Attic Bedroom82.7%
Bedroom Addition, Upscale81.1%
Roofing Replacement80.8%
Family Room80.6%

Source: Remodeling Online

Level The Playing Field

Remodeling Online's national report may not account for peculiarities in your neighborhood. Build your home to over achieve in the neighborhood and it could under perform on the resale market.

"That means $10,000 spent on a kitchen remodel in a mobile home next to the railroad tracks in a poorly rated school district will not reap the same return as $10,000 spent on a 6-bedroom, hillside home with a view, in a highly rated school district," said Kit Davey, a Redwood City CA-based interior designer, staging specialist and publisher of AFreshLook.Net website.

As important as what you do to a house is how you do it, especially if the work is visible from the curb. Any additions should blend in with the home's existing style and design of the homes in your neighborhood.

"Improve beyond the market norm and people just will not pay for it," said appraiser Greg Stephens, a vice president with Plano, TX-based LandSafe.Com. the appraisal quality control division of Countywide Home Loans.

Nail Some Research

To learn what's typical in your neighborhood, roll up your sleeves and do some research.

  • Keep track of the maximum sale price range for your street and immediate neighborhood. These figures are the spending limit buyers put on your area. If they want to spend more, they will go elsewhere.
  • Monitor the range of selling prices in your local newspaper and online listings. See how long unimproved homes stay on the market compared to improved homes. Get the advice of an experienced real estate agent who knows the neighborhood and the impact of home improvements.
  • "Visit open houses in your neighborhood, keep an eye on the sale price of homes that sell and try to determine why homes sell for more or less than each other in the same neighborhood. Is it the recently remodeled kitchen done in neutral finishes, is it the landscaped back yard, is it the added-on master bath?" Davey said.

    Once your research is complete, follow experts' guidelines.

  • In the best market, where there's room for appreciation, improvements are generally wise if they don't push your home's value beyond 20 to 25 percent above the current value of like homes in the community.
  • In a tired market, where there's less wiggle room, avoid pushing the remodeled value beyond existing values.
  • In any market, if your neighborhood's homes have mixed values, keep your improved home's value just below the top value. The high end homes will help buoy your home's value while offsetting pressure from low end homes to sink it.

Improving Your Lifestyle

Whether or not you over improve is also relative. If remodeling is a lifestyle choice rather than an investment decision, you can stretch.

"If you have no intention of moving, then over improve to your heart's delight. If it puts a smile on your face, if it makes you happy, then it's not money it's quality of life," said Cincinnati-based Tim Carter, CEO of Ask the Builder.

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