The home remodeling industry has been predicted to reach a market size of $485 billion in 2023. Considering the return on investment (ROI) of remodeling projects is essential to understanding the value they can add to the home upon resale. ROI measures the profitability of an investment by dividing its benefit by its cost. In the case of home remodeling, taking the added value a project brings to a home and dividing it by its total costs to complete will determine the overall return on investment of this home improvement.
According to the Remodeling 2023 Cost vs. Value Report, an HVAC electrification conversion is the home remodeling project with the highest return on investment in 2023, with 103.5% of its costs recouped from resale. We have created an original graphic that clearly shows all the projects included in the report, along with their associated costs, recouped value, and ROI percentage. We also show which remodeling jobs had the biggest increases in ROI over the past year.
Home Improvement ROI Chart 2023
In order to visualize the value of the 23 different home remodeling projects featured in this report, we compared the projects’ ROI along with their total costs to complete. In the graphic above, the cost of each project is represented by the overall length of its wedge in gray. The other color depicts the estimated return of the completed project.
What stands out here is the fact that the cost of the project isn’t necessarily linked to its ROI, so investing in the most expensive home remodeling project may not guarantee the highest recouped value. In fact, the most affordable project featured in this report was an entry door replacement, yet it’s amongst the top three home remodeling projects with the highest ROI of 2023. This shows that a small investment in improving a home can lead to a large return. However, statistics tend to show that the more money spent on a home renovation, the higher the resale value. A primary suite addition costing over $325,000, for example, could potentially add a resale value of over $73,000 to the home.
A total of four projects are said to have an ROI of over 100% in 2023. This level of return has not been seen since 2017’s Cost vs. Value report when fiberglass attic insulation reached a recouped value of over 107%. This not only means that the entirety of the costs of these projects can be recouped upon resale, but those who invest in them may even see a profit, albeit relatively small.
HVAC Electrification Tops the List of ROI
As mentioned, this year’s most profitable home remodeling project is set to be HVAC electrification, with the average costs of $17,747 for this project potentially being recouped by up 103.5% with a resale value of $18,366.
With some U.S. cities and states recently adopting all-electric laws, people may be becoming more aware of the impact of natural gas on the environment. With electric HVAC already in place, potential buyers may appreciate the savings on the conversion costs. Tax rebates included in the IRA that come with this conversion could save the homeowner even more, making it a worthwhile investment.
Besides the benefit of a high ROI, switching to an electric HVAC system has additional advantages, such as reducing energy bills and maintenance costs, possibly making this home improvement particularly appealing to potential buyers.
Home Improvement ROI Increases Over the Past Year
According to last year’s Cost vs. Value report, every home remodeling project featured in the study saw a decreased return on investment compared to 2021 statistics. However, the home remodeling industry seems to have taken a turn. Nine of the projects analyzed this year showed an increased return between 2022 and 2023.
A steel entry door replacement was calculated to have seen the biggest increase in ROI on the list of featured home remodeling projects at 36.9%. Other notable increases include a siding replacement, which rose up to 28% for vinyl and 20% for fiber-cement, and a minor kitchen remodel at 15%. In fact, six out of the nine projects to have seen an increase in ROI were outdoor remodeling projects. It seems that improving the exterior of a home is more likely to result in a higher return on investment than last year.
What’s more, investing in exterior home improvement projects doesn’t necessarily incur high costs, as boosting a home’s curb appeal can be as simple as replacing the front door at an average cost of $1,500.
The True Cost vs. Value of Home Remodeling Projects
The Cost vs. Value report reveals fluctuating ROIs year on year. The true costs recouped from home remodeling projects depend on many factors, such as location, trends, and local costs. The costs recuperated from these projects can then fluctuate according to the state of the real estate market at the time of resale.
Another noteworthy characteristic of return on investments in home remodeling projects is that costs do not correlate with value. Although costlier renovations tend to result in a higher resale value, these investments don’t necessarily yield a higher return. In this year’s report, affordable projects, such as an entry door replacement, have proven to have some of the highest ROIs of 2023.
Therefore, it’s important to note that the return values indicated in the report are only to be used as a general guideline when deciding which home improvement projects to take on to add value to a home in 2023.
Irena is an industry analyst at Fixr.com. She analyzes and looks for visual ways to simplify data. She has been researching and writing about home improvement and personal finance since 2018. At Fixr.com, she is constantly looking to give homeowners the best advice on how to invest in their homes.