Yogi Berra once said, “If people don’t want to come to the ballpark, how are you going to stop them?” He was talking about an impending baseball strike, but his tortured logic applies equally well to homeowners’ current attitudes about spending money to remodel their homes.
True, there are signs of an economic uptick: some remodelers have seen a jump in the number of leads, and a few companies I’ve talked with even tell me that they are suddenly swamped with work. Those are all encouraging signs. But for the fourth year in a row, the Remodeling Cost vs. Value Report shows that the trend in the remodeling cost-to-value ratio is headed down. And I think that means it’s going to be slow for awhile longer.
That’s because the Cost vs. Value Report has consistently provided an accurate snapshot of trends in the real estate and remodeling markets. In 2006, for example, the Report predicted a sharp downturn at a time when existing homes were still selling for top dollar and lots of remodelers still had 12-month backlogs.
That year also marked the start of another trend. In 2005, all but two of the 10 top-ranked projects were large room remodels and additions or kitchen and bath makeovers. By 2006, the picture had changed so completely that seven of the 10 top-ranked projects were exterior replacements. Although replacement projects improve curb appeal, which is important to how fast and at what price a property sells, they are also practical, need-oriented improvements that happen to be the least-expensive projects covered by the Report.
The fact that small, inexpensive replacement projects moved so suddenly to the top of the list was a harbinger of changing priorities among potential remodeling consumers. The fact that replacement projects once again dominate the top 10 this year shows that those priorities continue to have the upper hand.
That’s partly because home improvement loans are still hard to get, and the maximum loan amount averages about $20,000. But it’s also because many homeowners have come to realize that their home is not an ATM, and that they might need to live in it for another five years before they can sell it at the price they want or need. That tends to focus attention on projects that are affordable and necessary to protect their investment.
Large projects will return, but at the moment, small is where it’s at. To meet revenue goals in 2010, it may take two or three times as many jobs. That, in turn, means you will need to generate two or three times as many leads. To do that, you’d better be marketing like there is no tomorrow — because there won’t be, unless you change the way you do business.
Or as Yogi would say, “The future ain’t what it used to be.”
—Sal Alfano, editorial director, REMODELING.