Real estate has been on a whirlwind ride in recent years, and 2023 continues that trend. The boom of 2020-2022 has given way to a different market where higher interest rates are pricing out many buyers and keeping potential sellers in place, even as home values remain elevated above pre-pandemic levels.
As the market changes, so too does the list of best home renovation projects to increase value. During the pandemic, staying at home led to an increase in extravagant outdoor kitchens and elaborate home offices. However, as homeowners start to leave the house more often, the best return on investment (ROI) in 2023 comes from smaller renovation projects and updated kitchen, bath, and living spaces.
Renovations will become increasingly important for homeowners seeking an upgrade without having to buy and take on higher interest rates. According to a HomeLight survey, 38% of top agents predict that homeowners will use their home equity to finance home renovations in 2023. However, not everyone will stay put after renovations. The same survey found that 34% of agents predict that more homeowners will try to sell and cash in, in case prices drop in 2023.
To help you prioritize your list of projects, we've compiled research from the National Association of Home Builders (NAHB), the National Association of the Remodeling Industry (NARI), and top insights from HomeLight agents.
Renovating your home can be a smart investment, but there’s no guarantee that you'll make back the money you spend. The national average return on investment for popular remodeling projects in 2022 was around 59%, according to Remodeling magazine’s Cost vs. Value report. Although this is a continuation of a downward trend over the past few years, some projects now have a higher return on investment due to buyer demand and pandemic-related priorities.
To increase your home's value, here are some home renovation projects to consider in 2023:
1. Improve your home's curb appeal
Curb appeal is important because it gives buyers a first impression of the home and can get them excited about it as soon as they drive up. Real estate agents estimate that investing an average of $3,467 on curb appeal projects can yield an ROI of 238%. Basic yard care, such as cutting grass, weed control, and fertilization, is crucial. Adding three cubic yards of bark mulch and tidying up the landscaping, including shrubs, walkways, and flower beds, can also improve curb appeal.
Fresh exterior paint can add an estimated 152% ROI or about $7,600 in resale value, while a new garage door has an estimated ROI of 133%, or about $2,800 in resale value. Renovations like a garage door replacement, siding updates, adding a deck, and creating a grand entryway can often provide the best ROI for renovations that buyers see before they even walk through the front door.
2. Create a functional floor plan
The functionality of the floor plan often determines livable square footage, which increases your home's appraised value. Smaller bathrooms and kitchens that are separate rooms are outdated, and buyers are no longer as willing to make them work. Consider reworking the floor plan or adding additional space to make the home more functional for modern living. Adding large bathrooms, kitchens connected to other rooms, walk-in closets, and more prep space to the kitchen can improve livability.
If you have an unfinished basement of 400 to 1,500 square feet, adding flooring, drywall, and other touches to make it a livable space can have a potential ROI of 70%. If you can't add more space to the home, consider converting an unused space into a functional one, such as 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 seeking a spa-like experience in their bathrooms. Rain shower heads, double-sink vanities, extra storage, and soaking tubs are all features that can make a bathroom pop in 2023. Adding more square footage to the bathroom is also an option if you have more funds for a renovation. According to real estate agent Santiago Valdez, buyers are seeking more spacious bathrooms than they did in the past. Adding mirrors or reworking the floor plan to create the illusion of more space can also improve the luxurious experience in the bathroom.
4. Install a kitchen island or walk-in pantry
According to NARI, it's common for multiple people to be cooking at the same time with different food prep and storage needs. To accommodate this, buyers are looking for multiple sinks, flexible pantry and refrigerator space, various refrigeration options, and a convection microwave. HomeLight agents say the top kitchen upgrades buyers seek are:
- A kitchen island (64%)
- A walk-in pantry (62%)
- Lots of drawers and cabinet storage (57%)
These upgrades provide extra counter space for unloading groceries or takeout, gadgets, and food prep without bumping elbows. A double kitchen sink or a walk-in pantry rank high for 81% of buyers, according to the NAHB. Walk-in pantries alone yield 76% of their average $3,400 cost.
5. Build or convert a home office
If you're not a fan of cooking, consider converting an existing walk-in pantry or closet into a home office. In Provencher's experience, devoted space for a home office is a bonus. More than 70% of buyers interested in a home office or exercise room want it to be 100 square feet or larger, according to the NAHB.
Sellers can remove clothing racks in a double closet and put in a tabletop and adjustable shelving for office space, which fits well in a guest room or is an efficient way to use the closet in a baby's or toddler's room. The beauty of a home office is that it doesn't have to look like a cubicle. NARI suggests matching your home's decor and introducing 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).
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
- Adding a pool can increase your home’s value by up to 7% if you live in a warmer climate area or a neighborhood where most of the other houses have pools.
- 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
- You could recoup between 62% – 65% of your costs if you decide to build a deck.
- Decks gained greater popularity during the pandemic.
- Hot tub
- An in-ground hot tub gives your backyard the feel of a high-end spa.
- Although you’re unlikely to recoup your entire installation cost, you currently stand to recover about 42%.
- If you’re shy about breaking ground, a freestanding hot tub isn’t a bad compromise.
7. Modify your home for intergenerational living
As the housing market remains uncertain, homeowners are shifting their expectations, including retirees. Instead of selling, 39% of HomeLight agents we surveyed predict that in 2023, retirees will opt to modify their current home to age in place.
This trend means that intergenerational living will become more popular as well. According to 22% of agents we surveyed, renovations will increase to make way for children moving in with their older parents.
One affordable and innovative housing solution in high-cost areas is an accessory dwelling unit (ADU), which can house extended family members or add rental income to a 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.
Building an ADU can be expensive, however, with an average cost of $180,000, but costs can vary depending on the type of ADU, materials used, design, labor costs, and systems equipped.
NARI advises considering universal design features, especially for older relatives or those interested in aging in place. These features 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.
Even adding a bench, hooks, and built-in cubbies to a small foyer entry creates a natural stopping point and a perceived value-add.
9. Small Changes Can Make the Biggest Impact
According to Valdez, the best return on investment comes from ensuring the home doesn't show signs of deferred maintenance. Some small updates that can make a big impact include:
- 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
Refinishing wood floors has the highest ROI at 147%, while upgrading insulation is also a good investment.
Bottom Line
Not every renovation project will increase your home value, so it's important to invest wisely. Focus on current trends and functionality that can build value in your home.
To decide where to focus your efforts, talk with a local real estate agent about which renovations increase home value in your area. Additionally, consider which renovations can help you enjoy your space until you're ready to sell.
