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It's fairly common knowledge that various home improvements or characteristics will increase your home's value, and hence, its selling price. What you may not know is how individual home improvements will affect your home's value and by how much. In addition, what effect does geographic area have on these value increases? Is adding a swimming pool in Alaska going to bring you as much return as the same pool addition in Phoenix? Not bloody likely, I can assure you. Here are some averages for various home improvement projects and how these different projects net value additions are correlated by geographic region of the United States. This data was obtained from various sources and most used a statistical analysis technique known as Hedonic regression. The finer points of such an analysis are beyond me, as anyone who was in statistics classes with me in college can attest.

As you may be aware, home prices are stabilizing, or even declining in many areas. This is just a correction after the frenetic run up in real estate values seen in many areas of the country over the last three years. From Q3 2005 to Q3 2006 all areas of the U.S. experienced price erosion, but not all metro areas or municipalities followed suit. The south experienced the smallest decline in home values, at only .1%, followed by the west at .9%, the mid-west at 2.5% and the northeast at a sickening (if you already own a home there) 4.8%. Within these general geographic areas there was considerable variation. If your home was in Portland OR, for example you could expect a 12.3% value increase, while down I-5 just a bit, in Salem OR, you managed a spectacular 24.7%!

Contrast that with homeowners in Boston, MA, who saw about 4.8% of their home's value evaporate, while homeowners in another NE metro area, White Plains NY, saw their's increase by an almost identical 4.7%. All you condo flippers in the south Florida area were especially hard hit, as home values in the <Miami area took a precipitous 5.6% hit. Run up the road to the north west a bit, in Tampa/St. Pete, and you got a whopping 9.6% gain! So, as the old real estate adage proclaims, it's location, location, location.

First up, a quick summary of some housing characteristics on your home's value. This data was obtained from homes in the northeastern U.S., but is fairly consistent with other areas of the country. If you're shopping for a home, these are some things to keep in mind as well.

• An additional bathroom has one of the greatest net positive effects on your home's value. Each additional bathroom will add a robust 24% to the value of the home. The effect of an additional bathroom is less in the western U.S. than in other areas of the country. They just don't mind waiting as much out there.

• Your car will love you if it gets to stay inside every night. Your bank balance will love you too, because homes with a garage sell for, on average 13% more than those without. If you live in the south, you see a bigger jump in value than for homes with garages in other areas.

• Central AC adds 12% to the home's selling price. This feature has some geographical correlation. As you would expect, homes in the south and mid-west tend to reflect higher values from this than homes in the north.

• You get a pretty nice, 6% increase if your home has good headroom. 9 foot or higher ceilings, that is.

• Each fireplace will net you roughly a 12% selling price increase, so hit the bricks. Seems like a huge return for a relatively small investment. It sure would be much easier to add a fireplace than to raise your ceilings a foot. Interestingly, there is virtually no geographic correlation for a fireplace. That's to say that you'll get this boost in selling price no matter where your home is located. This lack of geographic correlation is not exhibited for the other variables listed. Even the value associated by additional square footage changes to some degree with your home's location.

• A basement gives a significant value boost, at 9%, but don't do your laundry down there. Having a basement laundry room will lower your homes selling price by about 2%.

• Each additional bedroom will add approximately 4% to the selling price of the home. Interesting, but how does this average change with the number of bedrooms? For example, is the value increase going from 2 bedrooms to 3 bedrooms the same 4% as an increase from 4 to 5 bedrooms. Logically, it would seem that the value gain from 2 to 3 would be much greater.

• Not only is it pretty to live on the back nine, you'll get an average 8% price increase by living near the links.
  

In the mid-west the lot size of your home had a larger impact on price than in the other geographic areas. In the other areas, lot size had about an equal impact on the home's selling price. In addition, the larger the home, the less the lot size impacts the selling price.

These are increases in selling prices determined by features. They do not directly correlate to the return one can expect by adding one or more of the features listed. In that case, the cost of the added features would have to be used in the calculations to determine if the additions created additional net value. In 2005, according to the HomeTech Information Systems data published in the Cost vs. Value Report by the NAR, those remodeling projects that had the greatest net effect on your home's price were the following:

1 – Bathroom remodel 102.2%

2 – Siding replacement – 95.5%

3 – major kitchen remodel - 91% (up a tremendous amount since 2002, when it only generated a 67% return on your remodeling dollar)

4 – Window replacement – 89.6%

Now get to work! If you are taking on a remodel project, or looking at what features should bring a higher selling price, remember that sometimes it's not all about the money, but how much enjoyment or utility you and your family may receive from the project or home feature. In addition, some projects or features, such as windows or tankless water heaters can bring substantial, long term money savings.

Good luck, and here's to getting debt free!