The Housing Chronicles Blog: Say good-bye to granite countertops and other over-improvements

Wednesday, February 27, 2008

Say good-bye to granite countertops and other over-improvements

When granite countertops first came out, they were focused mostly in luxury homes and high-rise condos. When paired with stainless steel kitchen appliances, they presented a new design element that hadn't been done before. But when developers of condo conversions started putting in these same things en masse to imply "luxury," it became pretty evident that granite was becoming as commonplace as ceramic tile, thereby erasing what made it special. And with the premium for stainless steel appliances now all but gone, they're just another choice among several others.

Thus, this 'over-improvement' syndrome that characterized the housing boom of the early 1990s -- which also included emulating the sorts of baths one might find at a luxury hotel -- now seems to have run its course:

The granite countertop's glory days might be over.

During the housing boom, updating a kitchen with high end materials like cherry wood cabinets and a Viking stove was a sure bet to boost a home's value. Homeowners often recovered about 80% of the cost when the house was later sold.

But with so much more inventory on the market for buyers to choose from, they just aren't as impressed with the bells and whistles. Now most upscale renovations are returning less than 70% of their cost, according to a recent survey from the National Association of Realtors (NAR)...

NAR's survey revealed that returns on investment for a wide range of high-end interior redecorations dropped in 2007. An upscale bathroom renovation cost an average of $50,590, nationally, but only added $34,588 to house value - a 68.4% return. In 2006, a high-end bath renovation returned 77.4% of its cost.

Adding a brand new bath didn't pay off as well either, earning just a 69% return in 2007, compared with 72.8% in 2006. High-end kitchen remodels held up better, adding value equal to 74.1% of the cost, compared with 75.9% in 2006...

In 2005, a fancy kitchen renovation on the West Coast returned an average of 93% of its cost. Even if the owner got only a year or two use of it, the close-to-break-even return made it worthwhile. By 2007, the return had declined precipitously to 74%...

A separate report from the AIA also found demand for luxury features waning in 2007 according to the AIA. The popularity of high-end appliances declined from 65% to 47%. Demand for larger pantry spaces went down from 64% to 51% and wine refrigerators fell from 53% to 49%.

Because even a great wine can taste ordinary when you've had too much of it.

No comments: