2015 Remodeling Cost vs. Value Report: Less is More

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Are you considering selling in 2015?  It’s important to know which home improvement projects will bring you the most return on your investment. Visit the 2015 Cost vs Value Report (see Dallas specific info here) which compares the 36 most popular remodeling projects and the value those projects retain at resale.  If you’re making updates or just thinking about selling, let’s talk about how it will affect the value of your home!

The Cost vs. Value report is an annual collaboration between Remodeling magazine and REALTOR® Magazine, which breaks down the estimated cost of various remodeling projects and the estimated return on investment for those projects by region and by city, as well as by midrange and upscale projects. In general, the 2015 report boasts that “less is more”.  It’s the smaller improvements that will give you the most bang for your buck.

 

 

According to the January 2015 issue of REALTOR® Magazine:

As a general rule:

  • Simpler, lower-cost projects tend to return greater value. The national average cost for a steel door replacement was $1,230, for example. That’s the least expensive project on the list, and it ranks highest on the payback scale, returning 101.8 percent nationally on average. In fact, in 43 of the 102 markets surveyed, REALTORS® said the new door would recoup more than 100 percent of its cost. Other projects expected to top 100 percent payback in multiple markets: the midrange garage door replacement, the upscale garage door replacement, the midrange wood window replacement, and the minor kitchen remodel. Notice a pattern? With the exception of the kitchen job, they’re all replacement projects. In general, replacements cost less and provide a bigger payback than remodels or additions.
  • First impressions are important. The replacements that offer the greatest payback are the ones that are most obvious to buyers when they first view a house in person or online, such as new door or garage door. Siding replacement also provides great value at resale—particularly this year’s one new project, manufactured stone veneer,  which is expected to recoup 92.2 percent of its cost nationally on average.
  • Kitchens still offer the most remodeling bang for the buck. The only remodeling job breaking into the top 10 in terms of payback is the minor kitchen remodel with a national average cost of $19,226 and a national average payback of 79.3 percent.

Top 5 projects nationally in terms of cost recouped:

1. Entry door replacement (101.8%)
2. Manufactured stone veneer (92.2%)
3. Garage door replacement (88.5%)
4. Siding replacement, fiber cement (84.3%)
5. Garage door replacement (82.5%)

Click here for the full article from REALTOR® Magazine.

 

From the January 12, 2015 article in Remodeling magazine:

It’s no surprise that replacement jobs—such as door, window, and siding projects—generated a higher return than remodeling projects. That’s been the case since at least 2003. But the gap between the two categories widened by 3.8 percentage points this year even as both declined in value: Replacement projects showed an average return of 73.2% in this year’s report, just a smidgen below its 73.7% last year, while the cost-value ratio of remodeling projects sank to 60.8% in this year’s report from 65.1% last year.

When grouped by job type, siding jobs fared better than most, perhaps because of a rising perception nationwide of the value of curb appeal. Midrange vinyl siding replacement jobs were one of only five projects to rise in value, to 80.7% from 78.2%. A replacement job involving foam-backed siding slipped just half a point in value, to 77.6%, while the cost-value ratio for a fiber-cement replacement job dipped to 84.3% from 87.0%. Similarly, window jobs were no more than 2.1 points lower this year than in the 2014 report, and they ranked between ninth and 16th in overall payback.

In contrast, kitchen remodels declined as much as 6.6 percentage points, while the drop for bathroom additions and remodels was more modest, slipping 3.8 points or less.

As a general rule, the simpler and lower-cost the project, the bigger its cost-value ratio. Three of the four projects that cost less than $5,000 for a pro to do were ranked in the top five for cost recouped, and the other two were in the $5,000-to-$25,000 price range. No project costing more than $25,000 ranked better than 14th.

Click here for the full article from Remodeling Magazine.


Dallas Midtown (currently Valley View Mall and surrounding area)

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Could the 70 acres at Valley View Mall be the new Dallas Midtown?   This is the proposal that is scheduled to go before the Dallas City Council with construction beginning in 2016.   The same architectural firm responsible for NorthPark Center, Highland Park Village and the Galleria — has done the rendering that is part of the proposal being shopped to prospective tenants.  The extreme makeover for the 70-acre area bound by Preston Road, LBJ Freeway, Montfort Drive and Alpha Road will include 285,000 square feet of retail; 2,440 residential rental units; 250 condos; a 500-room hotel; 1,497,000 square feet worth of office space and a sprawling park (billed in the look book as the “Largest Programmed Dallas City Park”) that will link Midtown with the Galleria.  The architectural plans are done; now it’s time to fill the expansive space with tenants, including, as you can see in one of the renderings included here, a grocery.

  • Dallas Morning News, November 13, 2014

 

 


Billionaire Says Real Estate is Best Investment Possible

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Billionaire money manager John Paulson was interviewed at the Delivering Alpha Conference presented by CNBC and Institutional Investor. During his session he boldly stated:

“I still think, from an individual perspective, the best deal investment you can make is to buy a primary residence that you’re the owner-occupier of.”

Who is John Paulson?

Paulson is the person who, back in 2005 & 2006, made a fortune betting that the subprime mortgage mess would cause the real estate market to collapse. He understands how the housing market works and knows when to buy and when to sell. What do others think of Paulson? According to Forbes, John Paulson is:

“A multibillionaire hedge fund operator and the investment genius.”

According to the Wall Street Journal, Paulson is:

“A hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.”


How Interest Rates Impact Family Wealth

How Interest Rates Impact Family Wealth. (see full article here)

With interest rates still in the low 4%’s, many buyers may be on the fence as to whether to act now and purchase a new home, or wait until next year.

If you look at what the experts are predicting for 2015, it may make the decision for you.

Predictions for 2015 3Q:

Even an increase of half a percentage point can put a dent in your family’s net worth.


Top 5 States From Which People Move to Texas

Texas has a net gain of 701 people daily from the other 49 states, most notably from five states:  California, Louisiana, Illinois, New York and Michigan.  This does not include from immigration or growth by natural causes.   In fact, in the last few years Texas has gained $27.34 billion in wealth migration within the United States, with a significant chunk of that coming from California.    Below is the breakdown of personal income wealth transfer from the five most significant states.

Gained Wealth From:

$6.40 billion

California

$3.45 billion

Louisiana

$2.40 billion

Illinois

$1.76 billion

New York

$1.44 billion

Michigan

–          CNN, May 202, 2014

 

Frisco & McKinney Ranked Among Fastest Growing Cities in Nation

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The new Dallas Cowboys headquarters in Frisco

The adage “everything is bigger in Texas” is holding true as populations swell and towns grow with new residents.  Data released by the U.S. Census Bureau shows that Texas is home to seven of the 15 fastest-growing cities in the nation between 2012 and 2013. Frisco ranked second with a 6.5 percent population increase, and McKinney ranked 13th with a 3.9 percent increase.   The report also highlighted Grapevine as the only Texas to grow to larger than 50,000 residents between 2012 and 2013.  Other Texas cities making the fastest-growing list include San Marcos (ranked first), Cedar Park (fourth), Georgetown (seventh), Odessa (11th) and Pearland (15th).

–          Dallas Business Journal, May 22, 2014

 

Editorial: California Bad For Business; Texas Great for Business

CEOs ranked California last in survey 10 years in a row, Texas 1st for 10 years.

For the past 10 years, Chief Executive magazine has surveyed hundreds of CEOs across the country about their experiences conducting business in various states.

It has used these surveys to rank the states’ business climates based on tax and regulatory regime, quality of workforce and quality of life. And for the tenth year in a row, California has come in dead last in the rankings.

 

On the other end of the spectrum, Texas topped the list, also for the tenth straight year. The best states for business were dominated by those in the South. Rounding out the top five states for business were Florida, Tennessee, North Carolina and South Carolina. Two of California’s neighboring states, Arizona and Nevada, also performed well, ranking seventh and eighth, respectively.

 

The worst states for business were high-tax states with powerful union interests. Besides California, the bottom five included New York, Illinois, New Jersey and Massachusetts.

 

Some of the CEOs’ comments about California’s business climate were quite telling – and sobering:

• “California goes out of its way to be anti-business, and particularly where one might put manufacturing and/or distribution operations.”

• “We relocated our corporate office from Los Angeles to Atlanta in 2006 largely because of the regulatory and unfriendly tax environment in the state of California. . . . Would make the same decision if I had to do it all over again.”

• “California could hardly do more to discourage business if that was the goal. The regulatory, tax and political environment are crushing.”

 

Chief Executive magazine Editor-in-Chief J.P. Donlon illustrated how California’s tangle of red tape has led to its shameful performance in the survey. “The Economist reports that it takes two years to open a new restaurant in the Golden State compared to six to eight weeks in Texas,” he wrote. “The task of unraveling the byzantine layers of regulations seems insurmountable. The jungle is too thick to be pruned. That’s why Carpenteria California CKE Restaurants (owner of Carl’s Jr.) is committed to opening 300 restaurants in Texas, but has no plans for new restaurants in California.”

The lesson in all this is that greater economic freedom leads to an improved business climate and greater prosperity. “If there is a pattern in the survey,” Donlon wrote, “it is that states have diverged in recent years in their experimentation with economic freedom. Those lightening the burden of government have generally improved economic growth over those insisting that state-directed spending and governance is best.”

Though the temptation to dictate others’ affairs is strong, especially when politics and powerful special interests are involved, putting one’s nose in another’s business is not good for business.

If the Golden State is to regain its luster, it need only remove the shackles it has placed on people to start businesses or work in the occupation of their choosing, and to generally pursue any interests they have that do not violate the rights of others.

–          Orange County Register, May 14, 2014


North Texas home sales down 5 percent in April from year ago

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A constrained local housing market caused another drop in home sales in April.

Sales of preowned single-family homes in North Texas by real estate agents fell 5 percent last month from April 2013.

And the rate of home price increases slowed dramatically, just 4 percent higher year-over-year. Home prices have previously been rising at a double-digit rate.

Housing analysts say the smaller price hikes are good for the market.

“We are clearly this spring not seeing prices move up quite as fast as last year,” said David Brown, who heads the Dallas office of housing analyst Metrostudy Inc. “We don’t want to let the market get ahead of what buyers can afford to pay.”

North Texas home prices are now almost 30 percent ahead of where they were in 2011.

Median sales prices of homes sold by real estate agents rose by 10 percent in North Texas last year. That’s around twice the average, long-term appreciation rate.

“The pace of appreciation wasn’t sustainable,” Brown said.

Neither was last year’s 17 percent rise in preowned home purchases.

North Texas home sales have been down slightly in three of the last four months, according to data from the Real Estate Center at Texas A&M University and the North Texas Real Estate Information Systems.

So far in 2014, sales are off 3 percent from the first four months of 2013.

Supply is tight

Real estate agents say they could sell more houses if the inventory of properties on the market increased.

The number of houses listed for sale with real estate agents in the area was 8 percent less in April than a year earlier.

On average it took 53 days to sell a house, but much faster home sales are reported in many neighborhoods.

With pending sales down in April, North Texas is unlikely to see a rebound in home sales until more properties are on the market.

There’s less than a three-month supply of houses available for purchase.

While home purchase price gains are moderating, Dallas-Fort Worth home prices grew faster than the nationwide rate in a new survey by the National Association of Realtors.

During the first quarter, D-FW home prices were up 9 percent from a year earlier, the Realtors said Monday. That’s slightly better than the 8.6 percent national home price gain.

Big gains elsewhere

In the survey of 170 U.S. home markets, the biggest price increases were in South Bend, Ind., up 26.8 percent, and Naples, Fla., up 26.6 percent. Thirty-seven cities had double-digit percentage price gains.

The greatest home price declines from first quarter 2013 were in Cumberland, W.Va., down 18.6 percent, and Springfield, Ill., down 15.1 percent.

All of Texas’ big-city home markets had strong first-quarter price gains. The largest was in the Houston area — up 12.8 percent from a year ago.

While tight housing markets in many parts of the country are driving prices, there’s been a slowing in the rate of home appreciation, according to Realtors’ chief economist Lawrence Yun.

“The cooling rate of price growth is needed to preserve favorable housing affordability conditions in the future, but we still need more new home construction to fully alleviate the inventory shortages in much of the country,” Yun said in a statement.

“Limited inventory is creating unsustainable and unhealthy price growth in some large markets, notably on the West Coast,” he said.


5 Financial Reasons to Buy a Home

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Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He also currently serves on the editorial board of the Journal of Housing Research and Housing Policy Debate. Last year he released a paper on homeownership – The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home.

Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available.

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2.) You’re paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3.) Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4.) There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5.) Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line

We realize that homeownership makes sense for many Americans for many social and family reasons. It also makes sense financially.