I read with interest that report every year and advise clients all the time on cost of remodelling and extent to remodel.  Really a remodel depends on the neighborhood and what the community the home is located demands and what buyers in that community expect to find in a home of that price.  Sometimes the remodel is about the days on the market and the competition too.  That being said I always find the cost they quote to be out of whack with the reality in my marketplace.

You're right that rate of return is a factor in deciding whether to remodel and how much to spend, but there's another factor here. If people really aren't planning on selling their homes immediately they may want the improvements that they're planning regardless of whether the home is overimproved from a return standpoint.

In our area of the country, sellers seem to think that by upgrading that thirty year old kitchen say by spending 40-50 thou, that their listing of the property would increase by a hundred thou, Wrong. When buyers walk into a listing they expect to see an upgraded kitchen with granite counter tops, even coreran is a turn off now a days. Went on a listing once and the lady of the house thought by adding a 300 dollar faucet that the value of their property would increase by 25 thou, "Hello."

Another good one in our area, is that when a property has to have an improved septic system, that the seller could pass that 30-100 thou cost onto the buyer with an increase in the listing price, Wrong. It may work in other parts of the country, but not here. 

Karen, the flipping programs on TV are establishing a mind set that every house has to have upgraded kitchens, bathrooms, etc. in order to sell. I watched a program last night on HGTV where a young couple didn't like the new appliances because they weren't top of the line stainless steel.

Good Post!

Karen - Congratulations on some amazing covereage on television.  You deserve it!

Karen:  Very timely post.  Many people are asking about upgrades they need to make to sell the home.  Also, lots of homeowners are thinking about staying put for awhile and making upgrades for their own enjoyment.