Kermit Baker, senior research fellow at Harvard's Joint Center for Housing Studies, offers three key observations about the 2003 Cost vs. Value Report
1. Cost recovery rates for home improvement projects remain high. Despite the fact that growth in spending on home improvements has been slowing nationally for most of 2003, cost recovery rates have been accelerating. Across all projects covered in this study, the average cost recouped was 86.4%. For virtually every project, this was higher than in 2002. This probably reflects improvement in the economy and in the sense that incomes will continue to increase over the next few years.
2. Low-priced projects are exhibiting higher cost recovery rates than high-priced jobs. During a recession and in the early stages of a recovery, it is typical that the upper end of a market suffers more than the lower. High-priced projects tend to be more discretionary, and households often want to wait for the economy to improve to undertake these expenditures.
3. Markets with high house price appreciations report higher-than-average cost recovery. In markets where house prices are growing rapidly, local economies are generally doing better than the national average. Homeowners are more inclined to spend on their homes, having more equity to undertake the improvements and wanting to protect their housing investment. In metropolitan areas that were in the top 50 nationally in terms of house price appreciations between mid-2002 and mid-2003, the cost recouped was much higher than the Report average of 86.4%. In these areas (including, alphabetically, Los Angeles, Miami, New York, Philadelphia, Providence, Sacramento, San Diego, and Washington, D.C.), the average cost recouped was 109%. In metropolitan areas that were in the bottom 50 nationally in terms of house price appreciation (including, alphabetically, Cincinnati, Cleveland, Dallas, Denver, Detroit, Indianapolis, Salt Lake City, and Seattle), cost recovery across all projects in the Report averaged 65% or less for every market except Seattle.
