Top 9 Renovations to Increase Home Value in 2023
The past few years have been a whirlwind for real estate, and 2023 is certainly continuing that trend. The boom of 2020-2022 has morphed into a different market with higher interest rates pricing many buyers out of the market and keeping many would-be sellers in place, while home values have remained elevated above their pre-pandemic levels.
With a changing market comes changes to our list of best home renovation projects to increase value. During the pandemic, staying in place gave rise to extravagant outdoor kitchens and elaborate home offices. Now, homeowners are leaving the house more and the best return on investment (ROI) in 2023 comes from smaller renovation projects and updated kitchen, bath, and living spaces.
Renovations will become more important to homeowners looking for an upgrade without having to buy and take on higher interest rates. In a HomeLight survey, 38% of top agents predicted homeowners will use their home equity to finance home renovations in 2023. But not everyone will stay in place after renovations. In the same survey, 34% of agents predicted that more homeowners will try to sell and cash, in case prices drop in 2023.
We’ve pulled together research from the National Association of Home Builders (NAHB), the National Association of the Remodeling Industry (NARI), and top insights from HomeLight agents so you can better prioritize your list of projects.
Get a Home Value Estimate Before You Renovate
How much is your home already worth? HomeLight can provide you with a preliminary estimate in preparation of adding a patio or kitchen island.
Renovations that increase home value in 2023
Remodeling can be a smart investment, but remember: there’s no guarantee you’ll make back the money you spend.
Last year’s average return on 22 popular remodeling projects came in at about 59% nationally, according to Remodeling magazine’s 35th annual Cost vs. Value report, an assessment of several common household remodeling projects. That’s a continuation of a downward trend over the last few years. In 2021, the average ROI for remodeling projects was 60.1% in 2021. In 2020, that number was 63.7%.
“I can tell you that the average return on investment for updating or remodeling a home, you get back seventy-four cents for every dollar invested on average,” adds Peter Clark, who ranks in the top 3% of 5,347 agents in the Portland, Oregon, area.
While you don’t want to have any renovation regrets by, say, installing hyper-specific fixtures and finishes, some projects now have a higher ROI because of buyer demand and pandemic-related priorities.
Consider these renovations as ways to increase your home’s value:
1. Boost your curb appeal
Curb appeal always gives buyers an important first impression, and can get them excited about the home as soon as they drive up. In fact, agents estimate that clients can yield an ROI of 238% for investing an average of $3,467 on curb appeal projects, including:
- Attend to basic yard care (cut grass, weed control, fertilization)
- Spread three cubic yards of bark mulch (including delivery)
- Tidy the landscaping (shrubs, walkway, and flower beds)
Go beyond the greenery, and see even more potential added to your asking price. Fresh exterior paint adds an estimated 152% ROI, or about $7,600 in resale value, our agents say. A new garage door has an estimated ROI of 133%, or about $2,800 in resale value.
Remodeling magazine’s 35th annual Cost vs. Value report found that you can often get the best ROI for renovations that buyer’s see before they even walk through the front door. Renovations like a garage door replacement, siding updates, adding a deck and creating a grand entryway all see high ROI.
Karin Provencher, a top real estate agent in Manchester, New Hampshire, says that new siding or trim often adds about 5% to 10% in value because it changes the look of the house. Vertical board and batten siding, which costs an average of $10,811, adds a modern farmhouse look that’s especially striking with black trim.
Add some low-voltage wiring on the walkways and driveway, and “you could really capture a buyer’s heart,” she says.
2. Create a more functional floor plan
Livable square footage often increases your appraised value. What really makes a space livable is the functionality of the floor plan. “More and more floor plans that don’t work as well nowadays are getting more and more of a push back,” according to Santiago Valdez, a Chicago agent with 21 years of experience. Things like smaller bathrooms and kitchens that are their own room are outdated, and buyers aren’t as willing to make them work as they used to be.
Consider reworking the floor plan or adding additional space to make the home more functional for modern living. Valdez recommends you consider features like these:
- Large bathrooms
- Kitchens connected to other rooms
- Walk-in closets
- Adding more prep space to kitchens
If you have an unfinished basement of 400 to 1,500 square feet, adding flooring, drywall, and other touches to make it livable space has a potential ROI of 70% by converting it into a “specialty room” that more than 60% of buyers crave.
If you can’t add more space to the home, make it more functional by converting unused spaces. Consider turning an unused home office into a bedroom or reworking an unused living room into a flex space.
3. Upgrade to luxurious bathrooms
Buyers are looking for bathrooms that feel like a spa experience. Features that will make a bathroom pop in 2023 include rain shower heads, double-sink vanities, extra storage, soaking tubs, and anything else that contributes to a spa-like experience at home, according to a HomeLight survey.
Having spacious bathrooms adds to the luxurious experience in a bathroom. Valdez says that buyers are wanting more spacious bathrooms than they have before. Look for ways to create the illusion of more space by adding mirrors or reworking the floor plan. If you have more funds for a renovation, consider adding more square footage to the bathroom.
4. Install a kitchen island or walk-in pantry
Nowadays, it’s more common to have more than one person cooking at the same time — and people with different food prep and storage needs, according to NARI. Multiple sinks, various refrigeration options, flexible pantry and refrigerator space, and a convection microwave to heat meals between conference calls and video meetings all have become desirable trends.
“The kitchen has always been a very central space to the home. Especially on new construction we are seeing more and more prep space in the kitchen,” says Valdez. “Actually having the kitchen be a place where people are cooking a lot.”
At the least, a double kitchen sink or a walk-in pantry rank high for 81% of buyers, the NAHB says. Among HomeLight agents we surveyed, the top kitchen upgrades that buyers sought were:
- A kitchen island (64%)
- A walk-in pantry (62%)
- Lots of drawer and cabinet storage (57%)
All provide extra counter space for gadgets, unloading groceries or takeout, and fixing food without bumping elbows. They also recoup a sizable chunk of installation. One HomeLight survey found that walk-in pantries alone yield 76% of their average $3,400 cost.
5. Build or convert a home office
If you’re not much of a cook, consider converting an existing walk-in pantry (or closet) into a home office. According to the NAHB, more than 70% of buyers interested in a home office or exercise room want it to be 100 square feet or larger, but in Provencher’s experience, just having that devoted space is a bonus.
“It definitely helps to edge out your competition,” she says. “I recently showed a condo that had a big walk-in pantry with their office in their pantry. They could keep the door open if needed, but it was a nice little private space on the first floor, where everything’s happening.”
She’s also seen homes where sellers have removed the clothing racks in a double closet and put in a tabletop and adjustable shelving for office space. This type of conversion fits well in a guest room but also is an efficient way to use the closet in a baby’s or toddler’s room, where a small dresser or wardrobe can handle the child’s clothing.
“The kids can be in a play space while you’re working, and at the end of the day, you can close it up and be done with it,” she says. “I’ve shown a few homes with it, and everybody is like, ‘Wow, this is so great.’”
The beauty of a home office is that it doesn’t have to look like a cubicle, either, NARI says. You can match your home’s decor and introduce natural surfaces and artistic pieces. For more appeal, be sure to find a way to add natural lighting (or at least softer lighting if you can’t access a window), not the fluorescent bulbs in a standard office building.
6. Expand your outdoor space
Buyers often appreciate functional outdoor space, but this feature now has even higher appeal. One survey of 2,000 homeowners found that participants spent 14 hours a week outside, or three hours more than before the pandemic. In addition, 7 out of 10 said adding to their home’s exterior spaces had become a new hobby, and 73% said being outside was “therapeutic.”
Touch up your garden or hardscaping, then consider incorporating any of these sought-after features:
Pool
Homeowners in certain parts of the country can increase their home’s value by up to 7% if they add a pool, according to HouseLogic. If you live in a warmer climate area, like Florida or California or you live in a neighborhood where most of the other houses have pools, adding a pool can make financial sense.
However, adding a pool isn’t always the right call. Talk to your real estate agent to get advice on the value a pool may or may not add to your property.
Deck or patio
Decks gained greater popularity during the pandemic, with one study from Principia Consulting reporting that 31% of homeowners built a new deck in 2020 where none previously existed, up from 25% a year earlier.
While costs vary based on materials and size, you could recoup between 62% – 65% of your costs if you decide to build a deck. The average cost to add a wood deck in 2022 is $19,248. Adding a composite deck in 2022 cost a bit more at $24,677.
Hot tub
An in-ground hot tub gives your backyard the feel of a high-end spa (and pairs well with an in-ground pool). Our agents say the value of an in-ground hot tub has grown about 71% nationwide, with the biggest draw in the Midwest, increasing from $1,890 to $3,899.
Although you’re unlikely to recoup your entire installation cost at a range of $8,000 to $25,000, you currently stand to recover about 42% – a significant increase from the 25% you’d have recouped before the pandemic.
If you’re shy about breaking ground, a freestanding hot tub isn’t a bad compromise. While freestanding hot tubs aren’t factored into a home’s overall value (appraisers consider these personal property), your agent can discuss a buyer paying for this separately.
A freestanding hot tub that costs from $2,000 to $8,000 can fetch roughly $800 more during your home sale than what someone would have paid before the pandemic. Buyers in the Northeast, South Central, Mountain, and Pacific regions are willing to pay upwards of $2,000 for it.
7. Modify your home for aging in place or intergenerational living
Uncertainty in the housing market means that homeowners will have to shift expectations, including retirees. 39% of HomeLight agents we surveyed predict that in 2023, retirees will opt to modify their current home to age in place rather than sell.
This means intergenerational living will become more popular, too. Of the agents we surveyed, 22% think that renovations will increase to make way for children moving in with their older parents.
An accessory dwelling unit (ADU) is an innovative and affordable housing solution in high-cost areas, plus a way to house extended family or add rental income to your property.
More buyers are looking for mid-price homes with ADUs, according to our 2023 Agent Insight Report. According to a study by NAR, ADUs can add up to 35% to the value of a home.
“Multigenerational living is a huge value-add,” Provencher says, boosting the typical home value in her area by about 20% to 25%. Even people who don’t plan to use an ADU as housing love the space as a home office suite, she says.
However, building an ADU can get expensive. The average cost to build an ADU is $180,000, but the costs can range quite a bit, according to Angi. The cost can be impacted by the type of ADU you build, material type, design of the space, labor costs, and the systems you equip the unit with.
NARI advises considering universal design features as well, especially for older relatives or those interested in aging in place. These can include blending ramps into the flow of the landscape.
8. Make your mudroom bigger and more functional
A mudroom or foyer with a place to drop off the day’s gear has long been a home design perk, especially in areas where corralling wintery shoes and boots is a must.
In-demand features include a laundry area, a central charging station for everyone’s phones, and shelving or other specified storage for each family member, according to ProRemodeler. Opt for recessed LED lighting and waterproof luxury floor tiles that are easy to clean to keep the area tidy.
Even adding a bench, hooks, and built-in cubbies to a small foyer entry creates this natural stopping point and a perceived value-add, Provencher says. “They want that drop zone.”
9. Small changes make a big impact
According to Valdez, making sure the home doesn’t show signs of “deferred maintenance” will give you the absolute best return on investment. These changes don’t have to be big renovations. They can be small updates to the home, including:
- Cleaning up the property
- Adding fresh paint
- Fixing windows with leaks
- Repairing any gas leaks
- Resanding floors
- Updating old or outdated appliances
- Filling in caulk or grout that needs repair
The renovation project with the highest ROI? Refinishing wood floors, according to NAR. You can recoup 147% of the costs for this project. Upgrading insulation in the top three for projects that will give you the best ROI.
If you have a low budget or not very much time to make renovations, consider the small things to help boost your home’s value.
Renovations can be expensive, so invest wisely
Not every renovation project will increase your home value. Focus on the current trends and functionality to pick renovations that will not only help you but build value in your home.
Keeping pace with what buyers like and what can increase your resale value can help you decide where to focus your efforts. Talk with a local real estate agent about which renovations increase home value in your area, then see which ones can help you enjoy your space the most until you’re ready to hit the market.
Header Image Source: (Petra Keßler / Unsplash)