Residents are ready to spend, but are doing so with caution or are breaking projects into phases.
Before 2008, banks were the largest employers in Charlotte, which was the second largest banking center in the U.S. (New York City ranks No.1). Jamie Oliver, president of Southend Home Improvement, says that almost half the company’s leads come from bank employees, but many are holding off due to uncertainty about jobs and bonuses. However, due to its marketing efforts, Southend’s sales volume increased by 25% in 2011 and roofing sales were up 80% over the previous year. It is also pursuing multifamily projects, working with property management companies and condo associations to install new windows or siding and to repaint exteriors. For residential projects, most clients aren’t financing but are using money they have saved. Jobs include kitchens, baths, and outdoor spaces, with clients getting five to seven bids (versus two to three before the recession). Oliver says that homeowners are also interested in boosting energy efficiency to lower their utility bills, with federal tax credits a bonus rather than a motivator to do the work. In April, Southend opened a satellite office in South Carolina to better serve the storm-driven roofing needs of this more rural market.
Though Duane Johns, co-owner of Advanced Renovations, also noticed cautiousness among banking employees, he is encouraged by new employers such as Electrolux and Charlotte’s role as an energy hub, drawing alternative-energy companies into the city. The remodeler says that after shrinking in 2008 and 2009, project size increased in 2011, and the last six months seem busier. He has noticed more remodeling activity in neighborhoods closer to the city and has even seen some new-home construction activity. In 2008 and 2009, customers were only looking at cost. In 2011, more sought value and professionalism — possibly, Johns speculates, as a reaction to bad experiences with low bidders. Homeowners are not splurging on large additions or extravagant details, instead opting for functional updates to increase the value of their homes.
From Forbes to Bloomberg Businessweek,Columbus raked in accolades throughout 2011, including being listed as one of the top 20 strongest economies coming out of recession (Bloomberg). Remodelers seem to agree with the sentiment of recovery, saying that Ohio homeowners are beginning to dust off the cobwebs of a slow economy. “It’s is a solid town,” says Gary Demos, president of Dave Fox Remodeling, in Columbus. “There’s money here, there’s education, industry.” Demos says that perceptions of Columbus’ strength and stability have even made an impression on his peers. “We hosted 11 companies for a peer group meeting last September,” he says, “and heard a lot of really positive comments about the city. In terms of sports, the downtown area, campus, and the Arena District really cleaning up the city and its image, people were saying what a great city Columbus is.”
After being entrenched in a wait-and-see attitude for a long time, Demos says that’s now shaking loose and homeowners are beginning to act. But, he notes, financing remains a concern for some. And, of those who have funds available for remodeling, many are focusing more on who they work with than on what they’re paying for it, compared to years past. “Before, price was a huge issue,” he says. “Everyone that had a project was looking for who could do it most competitively. Now they want to know who they can trust to do it well and to maximize their value.”
Design and right-sizing have also come to the forefront. Todd Schmidt, president of Renovations Unlimited, in Grove City, Ohio, says, “Our clients are spending more time on evaluating how much space they really need to add on and the potential of phasing projects to get the most from their budget. In the past, they may have renovated the whole house at once; now they’re doing the second floor first, and then the first floor. Or, if they had been planning on an addition, they’re looking at something like a 12-by-8-foot addition rather than a 20-by-20-foot project.”
Schmidt adds that he hopes the comfort level homeowners have adopted will snowball into more growth for the industry through the next few years. “We’ve heard a couple of different scenarios: that we’re in year four of a 10-year recession cycle, contrasted with the prospect that remodeling here could be back to 2008 levels by 2013. We try to look at the positive side and keep moving forward.”
Denver proper — not including the mountain towns and second-home markets — has seen a winnowing process among remodelers, contractors, and architects. “But in the past year we’ve seen an increase in remodeling activity,” says Michael Griggs whose Certified Restoration Consulting Group works with remodelers and restoration companies.
Cress Carter, owner of Old Greenwich Builders, a high-end general contracting company, says that his clients and vendors who have been sitting on the sidelines “no longer want to wait to do their project.” Carter’s business — mostly custom home building — has hardly seen a dip and doubled its volume in 2011. This may be an anomaly, but Dave Gartland, a partner at BOA Construction, says, “We’ve built more custom houses — three in 2011 — in a short period of time than we have in the previous 20 years.” BOA’s remodeling work “remains clustered at each end of the spectrum: small interior remodels — as much as they can for as little as they can spend — and some big whole-house jobs.” But, Gartland says, BOA is not seeing a lot of “bread-and-butter additions with master suites.” Though the housing market is depressed, and overbuilding has left some developments half empty, Carter says that his high-end clientele are building knowing they’re underwater on day one post-project: “People are going for long-term investments and plan to live in their homes for the next 20 to 30 years.”
Paul McClorey, president of Paulson’s Construction, in Howell, Mich., says that Detroit’s decline seems to have slowed, and that although “it’s not a bright picture, it’s not as negative as it once was.”. His business grew from 2009 to 2010, and 2012 looks promising for continued growth. He predicts growth in the area north and west of Detroit. “Oakland County will be the area of most immediate growth as the market returns,” he says. However, he adds, potential clients “have the desire to do things, but not the desire to make it happen,” and they have unrealistic expectations about project cost. Some are trying to find ways to complete a project by asking about purchasing their own products or doing some of the work themselves. Patricia Harroun, president at Cardea Construction, in Ann Arbor, Mich., says that 2011 has been the toughest year in her 26 years in business. “We’re so small,” she says, “we are directly tied to the economy.” Harroun says that contractors are now moving to remodeling — as are as former car industry employees. The competition has become “quite cutthroat,” with small contractors doing work “for the price of materials.” Some homeowners have unrealistic expectations about projects, and they usually choose to drop a project after some initial research. However, others have been saving money and are ready to update their homes. They seem more secure about their jobs than a few years ago and “are buying good-quality products and splurging on finishes,” Harroun says. “There is less buyer’s remorse.”
The Milwaukee-area economy has benefitted from relatively low unemployment (8.5% as of press time) that’s expected to decline into 2012, as well as increases in median income. Homeowners are spending carefully, but they’re spending. “We all went through the ‘What happened to the economy?’ phase, and it was negative for so many years,” Kevin Anundson, president of The OAR Group, in Elm Grove, Wis., says. “Now we all know that we’re working harder for the same or less money ... When something happens long enough, it becomes normal. This is our new normal.” For many Milwaukee-area remodelers, the new normal is defined by smaller projects or phasing of large projects that, three or so years ago, may have been done all at once. “In 2007, customers called us to remodel their whole kitchen because the dishwasher had broken,” says David Pekel, president of Pekel Construction & Remodeling, in Wauwatosa, Wis. “Today when the dishwasher breaks, they call the repairman.” Pekel adds, “Clients are coming to me saying, ‘We have five projects to do in the next five years. Can you help us understand if there’s a rhythm to how they should be done?’ They want to invest as much as they can comfortably in each phase of the project. It’s still the same pizza, just one slice at a time.”
Pekel adds that many homeowners are focusing on home improvement rather than on remodeling: upgrading mechanical systems or repairing and replacing exterior products. “To that end, the economy is influencing the degree of home improvement that’s going on.” Anundson and Pekel both note that financing has had a major effect on the size and scope of Milwaukee-area remodels. “There are challenges in paying for projects — even some homeowners who appear to be well-off can’t get financing,” Anundson says. Pekel agrees: “People are using more of their own money, and that’s one of the reasons these projects have taken on a more affordable or realistic budget character.” Anundson believes many homeowners are “sick of waiting” for the economy to improve. “This won’t be our ‘normal’ forever,” he says. “There are better days coming.”
Smaller projects, tighter budgets, say remodelers in Minneapolis. “It’s not quite as fun as it used to be,” according to Ali Awad, a principal in the design/build firm Awad + Koontz. “And it’s a lot more competitive.” Veteran remodeler Ed Roskowinski, with Vujovich Design Build, agrees. His company did 60 projects in 2011 — 20 more than the previous year — but they were smaller in volume.
“Our larger projects are typically driven by new purchases,” Roskowinski says, but “since the real estate market has been down, we’ve seen fewer large projects.” Despite the difficulties, remodeling projects have been steady, especially through the summer and especially for subcontractors, says Dan Hanson, owner of Hanson Building & Remodeling, who has been a sole proprietor for the past three years. The weather plays a big role in Minnesotans’ decision to remodel, and for roofing companies, a year of snow, ice, hail, tornadoes, and heavy rains has been a boon, says Dave Karel, president of Garlock-French Roofing. But because a large number of roofs in this market have already been done, Karel says he isn’t “overly confident” about the future., and will remain conservative in his budget estimates for the next few years.