Industry Milestones

Through technology, “you can often eliminate having to go somewhere in person, avoid a meeting, and avoid load time, windshield time,” says Joe Stoddard, office technology consultant and REMODELING columnist. “These are milestones.”

In that sense, the first technological breakthroughs of the past 20 years were also communications breakthroughs. “Radios were the biggest jump forward,” says Tom Schlieffer, PhD, a retired contractor who wrote Construction Contractor's Survival Guide and now teaches at the Del E. Webb School of Construction at Arizona State University. Being able to “get hold of people in remote areas makes it easier to manage the work. It not only allows instruction to flow but allows others not directly involved to know what's happening.”

The same holds true for cell phones, now nearly ubiquitous. “We were using the bag phone and paying as much as $1,500 a month and glad to have it,” says Stoddard who was a remodeler during the early 1980s. Stoddard also points to the fax machine as having an impact. “If we needed any kind of installation, methodology, or specs, someone could pull them out of a book and fax them to us. It cut down cycle time. It was huge.”

But the biggest milestone has been computer use. In 1985, “computer programs for the remodeler and the small builder were non-existent,” says Jim Strite, a Boise, Idaho, remodeler and an early tech user. Back then “you were talking $30,000 for a job cost program.”

In the mid-1990s, computers and specialty software became more widely used. Says Strite, Timberline construction software came down in price, but it “took someone very knowledgeable in the accounting field” to make it beneficial. The development of HomeTech estimating software, QuickBooks, CAD, Chief Architect, Soft-Plan, and other software has been a series of small milestones that have helped make users more professional. “They enhance a company and its sense of keeping things organized and categorized. We can now build a database and export information to provide us with trends,” says Strite.

Those pieces of information are the keys to success. “The remodeler who owns the project data owns the project,” says Stoddard. What's made that data easier to disseminate has been the Internet and the World Wide Web. “E-mail allows a one-to-many distribution,” says Stoddard. “That's its power, getting everyone on the same page.”

Many remodelers like Strite took a Web presence early on. Now, a Web site is a must-have. “In the past five years it's been so easy to set one up,” says Schliefer. “Probably over 50% of contractors have one. In a few years it will be 100%.”

Design/build may seem an odd milestone to mark, because it is still evolving. Yet it has made an impact on the industry — as a new way to do business and in the way clients think about design -— and will continue to do so, particularly in and around urban areas with affluent, educated clients.

Although Fred Case changed the name of his business to Case Design/Remodeling in 1981, he and several others such as Tom Kelly of Neil Kelly Design/Build in Portland, Ore., had been doing design/build — single source design and remodel — for many years. By the mid-1980s, the process, as Case's president Mark Richardson calls it, had gained a following.

Driving the emergence of design/build was a sense of frustration with the lack of control found in the traditional triangle formed by client, architect, and remodeler. “We were getting uncomfortable seeing our designs being built by someone else,” says Kelly of the transformation of his company. He also points to the antagonistic nature of the architect-remodeler relationship as another sore spot that lead to change.

There are no hard figures on how many firms have changed their business model to design/build — in part because there is no true definition of the process — but anecdotally, the Washington, D.C., metro area has the largest concentration of design/build companies, with more than 50.

Changes in business practices meant educating the consumer. Convincing prospective clients to choose a single source for their project was a formidable task. Remodelers like Kelly forged ahead. “We just changed how we did business, and those who didn't want to do business with us the way we were defining it — although we were flexible where we needed to be — we wouldn't do business with them. As more contractors adopted those kinds of processes, the consumer over time has been educated as to what design/build means.”

Remodeling has come into its own over the past 20 years, defining itself as an industry apart from construction and home building as well as improving its public face. “Remodeling was the red-headed stepchild of the construction industry,” says Darius Baker, former chair of the National Association of the Remodeling Industry's (NARI) education committee, echoing an oft-spoken sentiment.

Shaping the industry was a thirst for knowledge shared by many remodelers across the country combined with “an increase in volume in the industry and a need to raise the bar and be more professional in the way we conducted business,” says Jud Motsenbocker, winner of REMODELING's 1998 Lifetime Achievement Award.

“I'm not convinced that consumers care about [credentials], but education is vital,” says Tom Kelly, whose father, Neil Kelly, was NARI's first president.

The growth of the market caused the professional associations — NARI, the Remodelors Council of the National Association of Home Builders, and National Kitchen & Bath Association — to take notice and respond with certification programs. These include NARI's Certified Remodeler (1985) and Certified Lead Carpenter (1996) designations, the NAHB's Certified Graduate Remodelor (1988), and the Certified Aging in Place Specialist (CAPS) designations. NKBA was the forerunner, with programs begun in the 1970s.

Along with the growth of the professional associations in the 1980s, came the development of trade publications, which offered another arena for education as well as a forum for manufacturers to connect with remodelers. Peter Wood and, eventually, Hanley Wood publishers and REMODELING “have been a dominant force in helping shape the industry,” says Les Cunningham, a veteran remodeler who is now a consultant.

Through REMODELING, Hanley Wood created a major trade show, The Remodelers' Show, first held in Pittsburgh in 1991, and four years later it held its first JLC Live show.

The other driving force in professionalism was the development of peer review groups such as Remodelers Advantage Roundtable (1991), Cunningham's Business Networks (1986), and the NAHB's Remodelor 20 Clubs (1997), as well as personal business consulting.

The 1980s gave remodelers yuppies and DINKs, great rooms and McMansions, microwaves, brass, and what Time magazine called “the mauving of America.” Inspired, perhaps, by Nancy Reagan's White House makeover, homeowners' budgets and expectations soared, and REMODELING's debut issue, in May of 1985, warned readers to prepare “to field a lengthy list of questions about design, materials, workmanship, time frame and price.”

Much of the building activity involved new suburban developments, yet buyers of existing homes were revitalizing urban neighborhoods and historic towns as well, hinting at the back-to-the-city movement that continues today.

Recession struck in the early 1990s, driving interest rates as high as 17% and dampening remodeling activity and home sales alike. Economizing homeowners became do-it-yourselfers, pushing sales at The Home Depot to $15.5 billion by 1995. Remodelers learned to work with solar technology, skylights, 1.6-gallon toilets, and appliances approved by the EPA's new Energy Star program.

The early '90s also witnessed a shift in design sensibilities. “Cheap but chic” entered the lexicon as Target brought affordable design to the masses. “What was happening on the street began to drive style,” says Robyn Waters, a former Target executive. Gen Xers began to buy homes and wire them for technology. Other emerging population segments included immigrant families and older homeowners, aided by home equity loans and reverse mortgages that fostered aging in place.

The Internet and new shelter publications gave consumers unprecedented access to information about products, design, and price. “Reality” TV shows featuring dazzling home makeovers followed. Educated clients are “good for design” because they “stretch the envelope” with vivid colors, unique products, and sophisticated lighting and appliances, says Jim Strite. They can also be hard to keep up with. “I've had clients ask me about products I've never heard of,” says Don Van Cura, Don Van Cura Construction, Chicago. Worse is when clients “think that in one week there's going to be a new kitchen.”

More recently, safety fears and soaring home values, among other factors, have triggered “a reprioritization of our values around home,” says Vickie Abrahamson, a trend forecaster with Iconoculture. Observes Strite, “The home is that one place where people feel they can invest their dollars and be secure.”

“Remodeling used to be a profession that was more highly regarded as a career,” says Paul Winans of Winans Construction, Oakland, Calif. “High schools had a shop track, and the thinking was that if you couldn't make it in college, you could go into the trades and still make a decent living,” complete with a boat in the driveway and a spouse at home.

This scenario had already begun to change when REMODELING launched in 1985. The oldest baby boomers were entering their 40s, and the subsequent Generation X was not only smaller but (like many boomers themselves) “didn't want to work with their hands,” says consultant and longtime REMODELING columnist Walt Stoeppelwerth. Moreover, the rebounding service economy was luring young workers with well-paying jobs that came with perks rare among remodelers. “Even company owners get few fringes,” noted a 1986 REMODELING article, with most workers getting an hourly wage and little else.

As competition for workers intensified, by 1990 more than one third of REMODELING readers were offering employees health insurance, along with some paid vacation and holidays. Other employment costs were rising too, notably workers' compensation insurance. Many sophisticated remodelers today offer a full array of perks — and follow corporate management practices as well — yet the industry has “a very long way to go to become professional in our human resources practices,” says Linda Case, another consultant and longtime columnist.

As the traditional U.S.-born workforce dwindled, “the only thing that really saved us” was immigration, says Hugh Rice, chairman of FMI, a management consulting firm. Hispanics nearly doubled their share of the population from 1980 to 2000, and construction workers of Eastern European and Asian origin are more prevalent. Though most began in unskilled positions, foreign-born workers “are now moving into the more skilled trades,” notes Rice, and, increasingly, running their own businesses.

Remodeling job functions have changed as well. A huge milestone was the lead carpenter system, which appeared in the mid-'80s. As companies grew, they subcontracted more, shed top-down management systems, and gave production managers more influence. Today many lead carpenters are effectively serving as production or project managers to several jobs — dropping by mainly to communicate with homeowners when non-English-speaking workers cannot. “We place a premium on people who can manage work” and on people and language skills, says Winans.

State licensing, permits for remodeling projects, building codes — all of these are driven by the aim of state governments to protect citizens from unscrupulous contractors. Bill Asdal of William Asdal & Company, Chester, N.J., says current regulations are not consistent. “They are all over the board. Some are insurance-related, some are fee-based. A handful test competency,” he says. “We're still way before the front edge of that as a national or industry-wide issue.”

During the last two decades, industry officials have discussed national licensing for residential remodeling contractors. However, most remodelers do not see this as the best solution for protecting homeowners. Remodeler Bob Hanbury of House of Hanbury in Newington, Conn., says good contractors already comply with existing rules and regulations — the contractors who have never complied will not be affected by additional rules.

Connecticut began requiring registration in 1984. Hanbury says local contractors have also lobbied for other solutions to protect homeowners. The state now has a “guarantee fund” that is collected via a registration renewal fee for contractors. Money from the fund is used to compensate consumers who have issues with registered contractors. Connecticut also earmarks money from registration fees to provide free classes for contractors, inspectors, tradespeople, and architects.

Asdal says legislators think they are protecting the public with licensing and registration, he says, but when the public buys based on the lowest cost, there will always be issues. Homeowners need to be educated so that they buy services based on lifecycle rather than cost.

Florida has one of the most stringent licensing requirements in the nation. Contractors need a certification of competency from their local jurisdiction or a state-wide certification that requires a test and four years experience. In 1993 the state added a requirement of 14 hours of continuing education for license renewal. In addition, says Tim Vaccaro, executive director of the Florida Construction Industry Licensing Board, in the 1990s the state added a fund similar to Connecticut's fund to reimburse homeowners who have grievances.

Building codes have also changed in the last 20 years. Hanbury says that Connecticut formerly had regional codes but now uses a National Model Code and includes a supplement for the state. Having a national code is helpful for contractors who move and for those who work in several states. They just have to know the national code and learn the adjustments for each state.

Hanbury says that many of the code changes relate to specific issues such as lead, mold, and radon. He believes that future code changes will be related to energy-savings. “Due to the energy crisis and cost of fuel between 1985 and now, part of the reason for building codes is to save us energy,” he says.

Tom Swartz, CEO/president of J.J. Swartz Co. in Decatur, Ill., looked at the influx of home supply chains in his market and thought, “There is no way for me to compete.” He, like many remodelers at the time, was concerned that the installed sales offered by these big boxes would drive him out of business.

Former kitchen and bath remodeler and industry consultant, Jim Krengel, recalls members of the National Kitchen & Bath Association who were angry when the association began offering training to home supply chain employees. He told his peers that he was willing to put his showroom in the middle of one of The Home Depot's parking lots. “There will be enough people not served by The Home Depot or those who do not want to buy in that atmosphere,” he says.

In the early '90s, remodeler Scott Chatel had returned to college for his business degree while running Chatel Contracting in Deer Park, N.Y. He was so curious about The Home Depot that he wrote a paper on the company and the changes it was bringing to the industry. “The lumberyards in our area were big ones that were strong enough to survive the impact, but the smaller ones are gone,” he recalls. The suppliers that did survive had to offer more services and incentives for their professional customers. “Everyone had to come up with a better mousetrap,” Chatel says.

The firms that felt the strongest impact were specialty suppliers such as electrical, plumbing, and HVAC dealers that had to close because they could not compete on price against home supply chains that negotiated lower prices due to the volume of products they purchased.

Looking back at their initial panic over installed sales, most remodelers today acknowledge — with some relief —that the service they offer homeowners will always have a place in the market. “Large corporations have a hard time offering handholding. They will probably never be able to capture that,” says Tom Kelly.

Swartz says the chains are best suited for simple installations such as storm doors, shutters, and windows. In its annual ranking of the nation's top pro dealers based on professional sales, REMODELING's sister publication, ProSales, found that 73% of respondents offer installed sales, and 6% say they have future plans to offer installed sales. That is up from 70% in 2004 and 67% in 2003.

Krengel says chain stores raised the awareness of remodeling as an industry in the eye of the public. “Before, most people lived with their kitchen and patched it up as necessary,” he says. “Big boxes created a demand for kitchens because of their advertising and computer design. Homeowners wander through a chain and see Corian and granite and cabinet ideas and design. Even if they don't buy there, it gives them the impetus to follow through.”

Manufacturers have not been able to ignore the growth of the remodeling industry over the past 20 years. Its jump from a $40 billion industry in 1980 to $250 billion today, and its projected growth to $350 billion in 10 years has garnered the attention of manufacturers. Because the remodeling industry included specialty replacement contractors, full-service residential remodelers, and small “dog-and-truck” remodelers, it had been difficult for manufacturers to define the market. In 1991, they took the first step at the first Remodelers' Show in Pittsburgh, says Rick Strachan, REMODELING group publisher for Hanley Wood. “Before this show, it was hard for manufacturers to put a face on the remodeler.”

After that first show, in an editorial in Building Products, a sister publication of REMODELING, editor Paul Kitzke described how remodelers hit the floor running. “They were relentless and curious and inspiring, and they kept exhibitors on their toes all three days. At first, I was surprised at the unconventional scene on the show floor, but later I realized that residential remodelers have received less attention from manufacturers over the years than any other groups that buy and install products, including do-it-yourselfers. The Remodelers' Show gave them the spotlight — a chance to learn — and they made the most of it.”

“Remodelers came from all over the country to share their ideas and perspectives and to learn from other craftsmen at a gathering that played a big role in shaping the remodeling industry we know today,” says Jay Lund, senior vice president of marketing and sales at Andersen Windows.

The show was just the beginning. As the market segment has grown, Strachan says manufacturers have focused on learning about the professional remodeler and more research has been done by the industry. Manufacturer associations have measured the growth. “It is documented that in some primary categories of building materials such as windows, cabinets, and roofing, there's a higher sales volume in remodeling versus new construction,” Strachan says. According to a 2004 National Roofing Contractors Association survey, 61% of low-slope roofing work is re-roofing, 12% is repair/maintenance, and 25% is new construction. For steep-slope work, 56% is re-roofing, 11% is repair/maintenance, and 33% is new construction.

Jim Krengel says the remodeling segment of the industry is pretty well served by manufacturers today. “They have products and promotions set up that are clearly for dealing with remodelers,” he says, noting that luxury product manufacturers especially appreciate the one- and two-item dealer sales that add up to a strong bottom line at year's end.

The good news is that the wider array of choices includes kitchen and bath faucets and fixtures, tiles, alternative materials, green products, engineered wood, and wiring and home automation. The flip side is that remodelers have to be more educated and serve clients by guiding them through the selection process.

Then+Now:

Stud finders

1985: Magnetic stud finders were the norm, consisting of a piece of plastic with a magnet on a swivel. Electronic stud finders just coming on the market were referred to in March 1986 JLC as “gadgets” and “odd.”

2005: Electronic density detectors that find rebar, concrete, and wiring in walls are common.

What do remodelers earn?

1985: Average annual base salary: $39,207

2005: rage base salary of Big50 Class of 2005: $135,779
Source of 1985 figure: 1985 survey of National Remodelors Council by NAHB Economics Division

Size of the remodeling industry in spending

1985: $83.1 billion
Source: REMODELING 11/85, page 28

2003: $233 billion
Source: Joint Center for Housing Studies at Harvard University

Annual new home prices

1985 Median: $84,300
Average: $100,800

2004 Median: $221,000
Average: $274,000
Source: U.S. Census Bureau

Median household income

1985: $23,618

2003: $43,318
Source: U.S. Census Bureau

U.S. population

1985: 237,923,975

2005: 296,039,946
Source: U.S. Census Bureau

New homes sold

1985: 688,000

2004: 1,203,000
Source: U.S. Census Bureau

Homeownership rates

1985: 64.1%

2004: 68.6%
Source: U.S. Census Bureau

Mortgage interest rates

1985: 12.42%

2005: 5.75%
Source: Freddie Mac

Remodel costs

1992: Major kitchen remodel: $19,261
Bathroom remodel: $7,202
Family room addition: $28,455

2004: Major kitchen remodel: $42,660
Bathroom remodel: $9,861
Family room addition: $52,562
Source: REMODELING Cost vs. Value Report

Plywood and OSB use in residential construction in U.S./Canada

1988: Plywood 81%
OSB 19%

2004: Plywood 28.6%
OSB 71.4%
Source: APA: Engineered Wood Assn.