Good question. I don't know the answer. During the housing bubble, common wisdom was that YES it did and, besides, it was basically free cuz you could borrow from your home's appreciation. We all know where those ideas ended up.
1. APPRECIATION. I have seen two homes in my neighborhood undergo extensive renovation. Medium-sized cottages like my own were spiffed up, with many magazine-worthy details. Both homes were put on the market shortly after renovation. There were not flippers, but people who changed their minds about where they wanted to live. Both sold. Did the owners get back their money? I don't know. In any case, I don't plan to put $200,000-$300,000 to the test to find out.
2. NOT DEPRECIATING. I had a colleague with an under-employed husband and scads of kids. When he got a job, they relocated. Their house was on the lower-end of the market. Nevertheless, their real estate agent told them to carpet the hideous patterned linoleum. She said that NOT putting in the money would mean a $10,000 lower asking price. Too bad my colleague didn't get to enjoy the new flooring for a while.
I think my bathrooms are in the second category: they are so tiny, have so little storage (none), and have such ugly bathing facilities that they would LOWER the price of my house. Most buyers would tear them out immediately. Most owners with the tolerance of normal people would have fixed things up about 10-15 years ago.
However, I have to be careful not to over-improve because I don't plan to move any time soon. The latest thing won't be the latest in ten years.
On the plus side, materials costs have gone down with the bursting of the real estate bubble.
Any thoughts on this tricky issue?