Zonda released its 37th annual Cost vs. Value (CVV) report detailing the most common home renovation projects across the nation ranked by return on investment (ROI) values.

This year’s report finds exterior improvement projects continuing a multiyear trend of providing home sellers with their greatest ROI. Nine out of the top 10 projects with the highest ROI were exterior improvement projects—a result that proves consistent in the CVV report, owing to values defined by real-estate professionals, who tend to place high value on a home’s curb appeal in establishing a home’s selling price.

The project with the highest average ROI on a national basis is replacement of the garage door (with an average 194% ROI), followed by replacement of the exterior door (188% ROI) and the installation of manufactured stone (153% ROI). The one exception, sitting at No. 5, is a minor kitchen remodel—a modest face-lift of kitchen surfaces that offers a 96% return when done prior to the sale of a house.

Hot Returns

Compared with last year’s CVV reports, 2024’s has seen a surge in a number of project values, with the average values of the top two projects—the garage door and steel entry door replacements—worth double what they were last year. These higher values result in ROIs for the top two projects of almost 200%, and an average ROI for the manufactured stone veneer project of over 150%. These “hot returns” are the highest in the history of the Cost vs. Value report and can be attributed to the unique market for existing homes we have in today’s economy with a combination of higher mortgage interest rates and existing homeowners sitting on loads of equity.

“There has been a strong shift in the existing home market that favors move-up buyers,” says Todd Tomalak, a principal of Zonda Advisory. This cohort is more discerning than first-time buyers. At the same time, there are fewer existing homes for sale, meaning fewer homes that meet this discerning buyer’s quality standard. “A new garage door or new entry door can make a pronounced difference,” Tomalak explains. “It could be the thing that makes one house stand out against all the others, making the home worth a higher price.”

Not all projects have risen in value, however. The HVAC conversion (replace a fossil-fuel-burning furnace or boiler with an electric heat pump) ranked at No. 1 last year with 104% ROI; this year, the project has fallen to No. 12, with 66% ROI.

The change is likely driven by lower natural gas prices and higher electricity prices in 2023 compared to the year before. When the HVAC conversion debuted as a CVV project in December 2022, it was new to many real-estate professionals, and they didn’t have a lot of experience with what this big-ticket conversion might do to existing home prices. “A year later, real-estate professionals have gained a better understanding of the project’s value,” explains Jacob Belk, vice president, Zonda Advisory. “They seem skeptical that it’s moving home buyers towards a higher-priced sale.”

Overall, the U.S. appetite for electric heat pumps has shrunk; heat-pump sales fell by nearly 17% in 2023, according to data from the Air-Conditioning, Heating, and Refrigeration Institute. However, as reported in the MIT Review, gas furnace sales declined even more than heat-pump sales in 2023, so heat pumps made up a slightly larger percentage of total heating appliance sales last year than in 2022. Yannick Monschauer, an analyst at the International Energy Agency cited by the MIT Review, said “The broad slowdown reflects broader consumer pessimism amid higher interest rates and inflation.” All indicators suggest heat-pump sales will accelerate as tax rebates afforded under the Inflation Reduction Act kick in. But the effect of those tax credits hadn’t been realized in the 2023 home-buying season, and it remains to be seen if home buyers will be persuaded to pay more for efficient electric HVAC going forward.

Read More