Contractors report losing far few jobs because of price and say they're now able to pick fewer, more lucrative projects, a new survey indicates.
L.E.K. Consulting's poll found that only 26% of the 550 residential and commercial contractors surveyed reported dropping their prices in late 2013 to win jobs. That's a marked difference from the 44% of respondents to a similar poll in 2010 who said they were reacting to price pressure by cutting margins. In the latest survey, conducted last November, roughly four out of every 10 contractors surveyed said they were selecting fewer jobs that were more attractively priced.
"The trends are becoming stronger," Robert Rourke, managing director of L.E.K. Consulting's Chicago office, told REMODELING today in an interview. "Average size of job, price of job, and duration of job are trending in the right direction. But the one that I thought was a particularly good sign was [the question] 'Of the jobs you lose, what is the major reason you lose them?' In prior surveys, the biggest reason had been price. This survey was the first time where price wasn't the big reason and the percentage for which price was a reason was cut in half.
"That tells us homeowners are less price-sensitive than they've been in the past," Rourke continued. "And other factors, such as the ability to get the job done on time and do the work, are taking on increasing importance. That's the first sign we've seen since we've done the survey."
All 550 of the contractors surveyed were professionals with decision-making authority in firms that have been in business for at least three years and had at least three full-time employees.
L.E.K.'s survey of contractors feeling reduced price pressure and greater opportunities to select jobs fits in with by Hanley Wood's Metrostudy economic group of improving economic conditions. Metrostudy's national Residential Remodeling Index (RRI) climbed 9% in 2013 from the year earlier, while the number of remodeler-worthy projects (generally, jobs worth at least $500), climbed by 8.4% to total just under 11 million. For 2014, Metrostudy forecasts the national RRI will rise just 2.8% and the number of projects will increase by 4.5% to reach just under 11.5 million.