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As housing market slows down, remodeling business picks up
By Kathleen Dayton
Staff Writer
The housing market may have slowed, but that doesn’t mean builders and contractors are sitting around.
Americans will spend nearly $233 billion on home remodeling in 2007, according to a recent industry forecast by the National Association of Home Builders. The figure represents a 1.9% increase from the record $228 billion spent in 2006.
“Remodeling continues to show strength despite the housing slowdown,” said NAHB Remoders chairman Mike Nagel, a Chicago home remodeler. “With more than 120 million homes in the United States plus $11 trillion in owner equity, the demand for remodeling will be there now and in the future.”
While remodeling activity eroded slightly during the first quarter of the year, industry experts are starting to see an uptick.
Market conditions slipped from 48.2 to 46.1 during the first quarter, with 50 being the dividing line between an expanding and contracting market, the NAHB recently reported.
Future expectations edged up to 46.5 to from 46.0.
“Typically you hear two things when the new home market drops off a little. You see an uptick in remodeling and you see an uptick in commercial construction,” said Phillip Ford, vice president of the Trident Home Builders Association.
An uptick in remodeling doesn’t occur the minute new home sales drop off, Ford said.
“I think it takes a little time for people to figure out what they want to do,” he said. “Now that the market has been down a little while, people are saying, OK, let’s remodel our house.
If you’re going to sell a home down the road, maybe this is the time to look at what you can do to get your home ready for sale in 2008.”
Remodelers are telling Ford that more Lowcountry builders are taking on remodeling projects, he said.
“That tells you remodeling is picking up steam,” he said.
Should you stay or sell?
Earl Mason, owner of Custom Construction and Remodeling, said remodeling is a good idea if you plan to stay in your house for awhile.
“You’re investing in the house now to make you happy, but you’ll actually gain from the money you’re putting in it when you sell your house later,” he said.
Rob Crawford, director of business development for Citadel Enterprises and chairman of the Trident Home Builders Association Remodelers Council, said consumers who plan to remodel in hopes of selling their house quickly or for a better price should be careful how far they go and how much they spend.
“To invest in a project and expect to immediately recover the expense is a little short-sighted,” Crawford said.
“Freshening a house up, doing some painting and cosmetic things like that is a great idea. But if you’re going to try to do an addition in hopes of raising the value of the house and recouping all that, that’s probably not a good idea. In addition to your taste, you never know who the buyer of the house will be and what their taste will be.”
Tori Martindale, vice president of Atlantic Builders and past chairman of the Remodelers Council, said the biggest remodeling trends include master suites and baths as well as kitchens.
“We’re taking out a lot of tubs, because people don’t really have time to take baths, and putting in big showers, adding dual showerheads, and putting the tile floors in that they always wanted,” Martindale said. “They’re using their home equity lines to just change the home and update it, making it into the dream home they always wanted.”
Reality show caution
A plethora of home remodeling reality shows has buoyed the industry in recent years, but Martindale warns Lowcountry families about any false expectations they could have after watching the Home & Garden Television Network and similar programming.
“These shows have brought the industry to the forefront and given people wonderful ideas, but some of these shows are not reality-based,” she said. “The money a lot of times is unrealistic and the time lines are very unrealistic. I guess it’s really waking up people to the possibilities, but they’re sugar-coating the timeline and the cost more than they should.”
Replacing a standard bathtub with a new shower could range in cost from $2,500 to as much as $10,000, Martindale said.
“The typical conversation with a potential client that I have is, whatever number you have in your head that you think this is going to cost, if you double it you’re going to be closer,” she said.
Remodeling jobs are smaller
Brian Hogan, owner of Hogan Construction and Remodeling, said remodeling jobs in the area tend to be smaller compared with those of a couple of years ago because of the rise in interest rates, but he still finds some people spending quite a bit of money.
“People are starting to do more high-quality products like granite, Ipe decking and hardiplank,” Hogan said. “We’re selling a tremendous amount of hurricane impact windows.”
One James Island homeowner just invested more than $200,000 in a remodel, he said, including a screened porch, new gourmet kitchen, master suite addition and a $10,000 bathtub “so big you could swim in it.”
The home was priced in the mid-$300,000s when the owners purchased it three years ago and was appraised in the high $600,000s before Hogan started construction. The house is now worth $875,000, he said.
“If you’ve lived in your home more than two or three years, the equity in the home is so large that it’s better to improve the home you’re in than to buy a new home,” Hogan said.
“They put $200,000 into the home. If they were to sell the home today they would make more than $300,000. That’s a pretty good return. That’s better than any bank interest you’re
going to get.”
Kathleen Dayton is a staff writer for the Business Journal. E-mail her at kdayton@charlestonbusiness.com.
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