Many San Diegans who remodeled their homes last year more than recouped their investments, a rarity among cities across the nation.
That’s the word from Washington, D.C.-based Remodeling magazine, whose annual Cost vs. Value Report compares construction costs for common remodeling jobs with resale value.
But with rising construction costs, and softening home values being felt across the country, the next update might not be so rosy.
“Labor and material costs have gone up over the past year, even in markets that are not ridiculously hot,” said Sal Alfano, editorial director for the publication.
“Because the housing market has cooled, it’s more a buyer’s market. We sort of expected that this year.”
Of course, in San Diego, everything is relative.
“San Diego in 2005 was a pretty hot market,” said Alfano. “It’s the kind of place where you don’t have to do anything to your house and it goes up in value.”
Consider that the average cost of a remodeled bathroom in San Diego was $12,000 in 2005, for a resale value of about $14,500 , meaning that the homeowner recovered 122 percent of the investment, said the report.
“San Diego is unusual in the sense that it had a lot of value over 100 percent on cost recovered,” said Alfano. “Ninety-five percent of cities have less than 100 percent.”
Buy, Buy, Buy
While the market is slowing, no one’s sure how San Diego’s remodeling industry is likely to fare.
Lawrence Bame has been organizing the annual spring and fall San Diego Home/Garden Show for 22 years now. The most recent one was scheduled for Sept. 15-17 at the Del Mar Fairgrounds.
During recent years producing this home-remodeling event, the former publisher of San Diego Home & Garden magazine said that “San Diegans have displayed an unstoppable thirst to buy it, buy it, buy it.”
“Nowhere in America are people more preoccupied with their homes and gardens and lifestyle than in San Diego,” he added.
Now, the market has tightened, said Bame, home-improvement loans are harder to get, and the “buy it, buy it, buy it” fervor has cooled some.
“We see it in the shows,” he observed. “A couple of years ago, exhibitors would tell me that, out of the show, they got a quarter of a million in business. But that isn’t as prevalent today as it was yesterday.” Still, Bame remains optimistic about the remodeling market.
King Of The Hill
Remodeling can be a good investment , if you don’t overplay your hand, said Rick Hoffman, president and chief operating officer of Coldwell Banker Residential Brokerage San Diego/Inland Empire.
“You need to be responsible in the amount of money you invest in your property,” he advised. “You should not over-improve, based on what exists in your neighborhood.”
For example, building an 8,000-square-foot mansion in a neighborhood of 2,000-square-foot homes will not drive up the value of the smaller houses, said Hoffman, and probably won’t do the bigger-is-better homeowner any good, either.
“You don’t want to be king of the country,” said Hoffman. “Being in the middle, updating in primary areas such as the kitchen, bath and family room, can give you value back.”
What home improvements garner the biggest bang for your bucks?
“If you focus on remodeling kitchens and baths, they will generally give you the best return , in excess of 100 percent of what you put into it,” said Keith Berkley, owner and manager of Berkley Homes, a North Park-based home remodeling business.
Enlarging a home also can be a good investment , if the project is done correctly, and all of the local municipality’s rules and regulations are followed.
If more homeowners are opting to stay put, some are sparing no expense in feathering their aging nests.
“Before, it didn’t matter what you did to your home, because the property values will rise,” said Berkley. “But people now are doing less house hopping. They are looking ahead for 20 years from now.”
Larry Zolezzi, president and owner of El Cajon-based LZ Construction, said that remodeling a master bedroom suite can cost upward of $100,000.
“Some master bedrooms have complete entertainment centers in them, or they have kitchenettes and coffee bars,” he said.
Second-Story Man
Perhaps the most challenging , and expensive , remodel is building a second story, said Zolezzi.
“Two-story additions are difficult, because the house is not built to carry that second-story load, and the earthquake standard is very severe,” he said. “Add to that the mechanical and electrical and plumbing, and you have a much bigger impact when you do a second story.”
But Zolezzi does his share of them.
Depending on the size and adjustments needed, a second-story addition could cost well over $100,000, said Zolezzi, and “those can easily hit $200,000 and $300,000, without a whole lot of extras.”
“For one lady, we are doing two bedrooms, and attaching a Jack-and-Jill bathroom, and converting some existing space on the stairwell, for over $200,000,” said Zolezzi.
Steve Jacobs, president of Nature Designs Landscaping in Vista, said that some homeowners are investing as much outside their homes as inside. On average, he said, landscaping projects can range from $40,000 all the way up to $1 million.
“People are very into their yards,” he said. “(They) go hog wild. They are actually putting dishwashers in the barbecue.”
