Final tallies on the destruction due to October's wildfires in Southern California were not available as of press time, but estimates in early November ranged from 1,500 to 2,500 homes destroyed, with more than a half-million acres burned.
>“The fires, while unfortunate and an awful thing to have happened, will help the building industry here in San Diego,” says Brad Schuber, of Arthur Bradley Design Build. Both the new-home and remodeling markets there have slowed recently.
Unfortunately, residents of the affected areas are all too familiar with that kind of destruction. In 2003, the so-called Cedar Fire — like this year's fires, fueled by Santa Ana winds — burned 280,278 acres and claimed 2,232 homes. Remodelers in the area are expecting many of the same conditions this year as they had in the aftermath of the 2003 fires: contractors appearing suddenly to make a quick buck rebuilding houses. “In 2003, everyone thought that they could start a company overnight,” says Todd Jackson, owner of Jackson Design & Remodeling, in San Diego. Additionally, the area can expect to see an influx of companies from outside the region, something that is fairly typical in the wake of most natural disasters.
EXERCISE CAUTION
To more well-established remodeling companies that may also view the disaster as an opportunity to gain more business, Jackson urges caution. “A lot of my competition thought this was their big ticket,” Jackson says of the prevailing attitude in 2003. Jackson says that many remodelers spent months “practically working for free,” receiving nominal payments from insurance companies in exchange for producing estimates. Those contractors mistakenly assumed that the estimates would turn into jobs. “Most of those people got nothing out of that work,” Jackson says.
One reason is because many homeowners found that they hadn't kept their insurance up to date, and couldn't afford to rebuild. Under-insurance should be less of a problem during this rebuild because many homeowners learned from others' plights four years ago, and updated their insurance policies.
Another reason is that insurance values are based on home builders' costs, and a remodeler is likely to be significantly more expensive. With that in mind, remodelers looking to enter the new-home market should avoid bidding on work, says Paul Winans, a facilitator for industry consultant Remodelers Advantage and the founder of Oakland, Calif., remodeling company Winans Construction. “If you want these types of jobs, contact architects you've enjoyed working with in the past.”
Winans speaks from experience. Wild-fires aren't unique to Southern California, and Winans was a remodeler in the Bay Area when the Oakland Firestorm burned 2,843 homes in the fall of 1991. Due to a national economic recession at the time, remodeling work was scarce, Winans says, and that led him to take on some new-home projects.
Brad Schuber, chief designer at Arthur Bradley Design/Build, in San Diego, has a different perspective. His company is seeking out rebuilding jobs, and plans to charge only for design work, not for bidding. His reasoning is partly philanthropic. “Losing your house is overwhelming,” he says. “It feels good to help these people.” To be fair, his company is well-positioned to handle custom homes — teardowns leaving just a single wall constitute much of the company's normal remodeling business. Other than a slight change in their marketing language, Schuber says that the biggest adjustment is keeping up with the daily release of information about programs and procedures to help expedite the rebuild. “It's a lot of extra reading,” he says.
One thing that Schuber and Winans agree on is that establishing a client relationship before the homeowner deals with their insurance company is particularly helpful. “You become partners,” Winans says. “You're not just someone trying to get a job, you're someone trying to help them rebuild the most significant asset they've ever had.”
ABOVE THE FRAY
What sorts of things can go wrong? On one of the houses he built in the Oakland Firestorm aftermath, Winans worked with a framer who included in his estimate labor for marking where the framing metal should go, and a foundation contractor who included in his estimate the labor for setting it. Neither contractor figured in the cost of the hardware itself, however, and you need not have been in the industry long to know who ended up paying for it.
Schuber predicts that the fires will have a lasting effect on housing in San Diego. “I think that there will be significant changes in the homes that are being rebuilt,” he says.
Unfamiliarity with trade contractors is one reason why Jay Riordan didn't build houses after the 2003 fires and won't after this year's. Riordan, president of Dream Design Builders, in San Diego, says it's taken him up to 10 years to find good, reliable companies in some of the trades. “I'm not going to tarnish my good reputation trying to find a good framer on a custom home.”
Riordan does, however, need to keep that good reputation by steering homeowners looking for his help to companies who are better-suited to serve them. He spent considerable time during and immediately following the fires speaking with home builders and insurance restoration companies, asking them about their processes and costs. He even spoke to some of those companies' post-Cedar Fire clients as references. “I want to help, but I'm not doing anyone a service if I'm eating up their insurance money because I'm not set up to build new homes.”
In 2003, Jackson pledged to stay above the rebuilding fray. “I said, ‘I have a decent remodeling business right now. I'm going to concentrate on remodeling the heck out of everything.'” While many of his competitors were concentrating on new rebuild business, Jackson fortified his business by scooping up remodeling projects.
While he plans to rebuild for the company spokesman who lost his house in the fire, and while he says he's OK if the company ends up with a couple more new-home projects, Jackson is once again sticking to the plan of concentrating on remodeling.
It's already paid dividends. Jackson Design & Remodeling had four measurements scheduled for the week the fires were contained. After being closed that Monday and Tuesday due to the fires, the company kept those appointments, and had three committed customers by the end of the week. “They didn't want to be left behind,” Jackson says. “They wanted to get locked in before the good contractors get busy.”
MINIMAL EFFECTS
Those homeowners also may have been eager to lock in their pricing, fearful of a material shortage or an increase in costs due to demand during the rebuild. According to Jackson, lumber prices jumped about 30% after the Cedar Fire in 2003. However, he says, “that was industrywide — it didn't have to do with our local fires.” He doesn't expect an increase even approaching that magnitude this time.
It took the San Diego area about four years to completely rebuild after the last wildfire (some houses were barely finished before the most recent fires hit). Many expect a similar time frame this time around.
Neither does Butch Bernhardt, director of information services at the Western Wood Products Association. “We don't believe the rebuilding activity in the fire areas will generate any immediate demand for lumber that can't be satisfied with current supplies available from mills,” he says. Bernhardt adds that the industry would have plenty of time to ramp up production if needed. “Based on experiences after natural disasters in recent years, it takes a while for insurance claims, building permits, and other issues to be worked out,” he says. “So the rebuilding activity won't be immediate and may stretch out over a couple of years.”
Remodelers in the area can also expect code changes. Winans recalls that materials choices were limited after the Oakland Firestorm, and that some architectural features, such as large overhanging eaves or projecting decks that aren't closed underneath, were barred. After the Cedar Fires, certain jurisdictions in the San Diego area changed their codes to require, for example, that exterior wall surfaces be noncombustible.
THE BRIGHT SIDE
Today, 16 years after the Oakland Firestorm, Winans notes that many of the rebuilt houses are full of door and window leaks. “They built some pretty crummy homes,” he says. Winans points out that the places where fires tend to spread are not flat areas, but slopes — where wind drives rain horizontally. Challenging building conditions mixed with inexperienced or lowball contractors is a bad combination for homeowners, but it means that contractors who choose not to rebuild houses in the area may eventually end up remodeling the structures later.
Speaking in the days after the fires, even Riordan — who lost his own home in the disaster — was able to find a silver lining in the hazy clouds of smoke that still lingered over the city. “Four years ago, San Diego was really booming,” he says. “The remodeling industry was booming, the new-home industry was booming.” So when the rebuilding effort increased the demand for resources, there were minor shortages for concrete, labor, and the like.
That's not the case now. “New-home building has pretty much stopped in San Diego,” he says, “and the remodeling business has been slow for a lot of people. The timing for the consumer and the contractor is much better this time around.”
Stand and Be Counted — Or Else!Not keeping a close eye on your mail this month could end up costing you $5,000.
That amount represents the fine for not filling out and returning the 2007 Economic Census form, which should arrive in businesses' mailboxes starting in mid-December. Conducted every five years, the Economic Census provides data that helps the government make informed decisions about financial policy, according to Census spokesman Bob Marske.
Not every company will receive a form; companies with no paid employees are completely off the hook, and forms will be sent to only a representative sample of firms with just one or two employees. All other companies should plan on filing their forms no later than the February 12, 2008 deadline. As was the case in 2002, online filing will be available — unique user IDs and passwords will be included in the information packet that will accompany the paper version of the forms.
Marske notes that the information gleaned from the Economic Census is useful to business owners looking to expand their services or move into a new market. To access information from the 2002 Economic Census and for more information on the 2007 version, visit business.census.gov.