As the remodeling industry continues to work its way back to pre-recession health, design-build firms in some of the country’s biggest markets are finding plenty of demand for major residential overhauls. Firms in a half-dozen urban areas cite varying local conditions but also point to shared experiences, including an apparent trend toward smaller projects, a continued interest in open floor plans, and a generally lukewarm reaction to paying extra for building features considered “green.”
Spending on remodeling will hit roughly $300 billion this year. The Joint Center for Housing Studies of Harvard University predicts this year will be better than last. Still, total spending probably will be less than the $324 billion reported in 2007, the year before the real estate bubble burst.
What Homeowners Want
More space is often a primary goal for homeowners—a couple with children, for example—who move to an urban or heavily developed suburban area and buy a house that’s decades old.
Bowers Design Build, which operates in the northern Virginia suburbs of Washington, D.C., often works with clients who have purchased well-built brick houses, nicely sited on their lots. The only shortcoming? The houses are too small. Buyers typically want each of their children to have their own bedroom, and no more than two children sharing a single bathroom. “The concept of four people sharing one bathroom is not it,” says the firm’s co-owner, Wilma Bowers.
In areas like San Francisco, where houses are tightly hemmed in by neighbors and additions sometimes are too complex or expensive, remodelers find themselves finishing out basements into conditioned living space. Larger lots allow horizontal additions; where that isn’t possible, going up a floor can double the original footprint. But that comes at a higher cost, and often not without a lot of angst from neighbors who worry about losing light and views.
Design-build firms report that kitchens and bathrooms are common remodeling targets, both as stand-alone projects and rolled into larger remodels.
“For every addition and whole-house project, we’re definitely touching the kitchen and bathrooms,” says Joseph Irons of Irons Brothers Construction Inc., based in the Ballard neighborhood of Seattle. “The kitchen is the candy of the house. It’s where everyone entertains. They’re the most used rooms in the house, and people want them nice.”
Bowers sees a demand for an upgrade that New Englanders would call a mudroom—a place to dump shoes, school backpacks, and sports equipment before going into the house proper. “A majority of our clients are creating what we call the family foyer,” she says. “It’s usually the first place you hit when you get home and the last place you visit on the way out.”
And open floor plans that combine kitchen, living, and dining areas remain very popular, which often means the elimination of some interior walls in older houses. “It’s always that combination between the family room and the kitchen,” says Sean Cutting of Boston-area Cutting Edge Homes. “We are still finding that people are enjoying the open floor plan.”
Even homes built in the ’80s often had traditional spaces—living room, dining room, family room—that now are being remodeled into a more cohesive area, says Geno Benvenuti of Benvenuti and Stein in Chicago. “Dining rooms no longer have a purpose as they once did because no one eats formally,” he says. “Dining spaces are more desirable than dining rooms.”
Tear Downs vs. Remodels
Tear-downs are a fact of life in many urban markets as buyers decide it’s easier to start from scratch than rebuild a house with a lot of problems or that’s badly sited on the lot.
Joe Normandy, the executive director of the National Association of the Remodeling Industry in metro D.C., says he often sees this scenario on his drive from the suburbs into town—a house goes on the market in week one, is sold in week two, and by week three has been razed. “There’s no interest in remodeling and flipping,” he says.
Benvenuti noticed the same thing in an area where his firm was working on a major addition a few years ago. In one block, five houses were torn down and replaced with three-story structures. “There are a lot of millennials who are staying in the city, and they are choosing to build fairly significant structures,” he says. “One of the things I noticed in this particular area was so many young people with strollers.”
But that’s not universally true. In San Francisco, says Jessica Johnson of SF Design Build, many older houses are Victorians with a deep aesthetic pedigree. They’re rarely demolished, and when they are, they’re often replaced with Victorian reproductions. One key factor: local ordinances that protect homes with historic value.
Are McMansions on the Decline?
Several firms said clients still want substantial additions. But completely filling an urban lot with structure seems to be ebbing, in part due to tougher local land use regulations. “We have definitely seen a decline in the number of clients in the past five years that want a McMansion,” Bowers says.
Benvenuti says smaller projects seem to be more common in Chicago, where the practice of building out houses so they are totally out of scale to the neighborhood has been curbed dramatically by local building codes.
In many Boston area communities, new and substantially renovated buildings can cover only so much of a lot, Cutting says, precluding huge remodels that cover every inch.
But if projects seem to be getting smaller, clients also are willing to spend more on quality finishes. “Fifteen years ago, we’d put in a $50 recessed light,” Cutting says. “Now we put in a $250 recessed light, and that’s not just because of inflation.”
Getting Past the Cost
Even though many clients are willing to splurge on specific selections, design-build firms still report sticker shock among some clients as they come to grips with what remodeling costs.
David Amundson, owner of TreHus, a design-build firm in Minneapolis, puts some of the blame on television shows for airing “terribly misleading” ideas. Calling out HGTV in particular, he says: “People think they can gut and remodel their kitchen for $30,000. People actually find out it’s going to cost $80,000 to $100,000.
“If somebody wants to gut and remodel a kitchen in a 1930s home and their budget is $30,000 to $50,000,” he continues, “we would tell them, ‘Let’s not do a feasibility study, because it’s not going to happen for that kind of money.’”
Bowers made the same point. “An average viewer, if you watch some of these HGTV programs, thinks they can do an entire house renovation for $100,000. That might get you a really nice kitchen, but it’s certainly not going to be enough of a budget to do the whole house.”
Green building seems to be gaining traction in the marketplace, but when it comes to remodeling, buyers are leery of spending more for products that save energy or are viewed as “sustainable.”
Benvenuti’s response was typical: “We offer it, but so many of those decisions are driven by cost,” he says. “Codes do have requirements, but homeowners are more concerned about how much it might cost—that’s the green they’re concerned about.”
Features like low-flow toilets, what Bowers calls “the easy stuff,” don’t add much, if any, cost to a project and are included without much discussion. But more expensive upgrades, such as ground-source heat pumps, aren’t as attractive. “Even some of our wealthier clients have chosen not to proceed because they feel the cost benefit isn’t there,” she says.
Irons says Seattle’s local energy codes are among the strongest in the country, so even his company’s basic remodels are probably more energy efficient than similar projects would be elsewhere. When clients expressly ask for green building features, Irons tries to match them with the right designer so the project has “the right shade of green.”
Says Amundson, “I don’t see a big demand. When push comes to shove, people want it to be pretty.”
Keys to Success
Design-build firms list a variety of factors that contribute to their business success, but there are a few common themes: establishing trust with clients; eliminating as many surprises as possible; establishing clear procedures, and hiring good people.
Amundson puts it this way: “It took me 32 years to learn this: There are four things you need to succeed. You need to find good people that have good systems, that do good planning, and have good management. You get those four things right and everything else will flow out of it. You get any one of those four things wrong, and heaven help you.”