Leads are down, close rates are dropping, backlogs are shallower, and project size is shrinking. Remodelers have become less selective about the work they do and who they work for. And some are doing work they used to sub out.
Or do they? We asked several dozen remodelers to rate their business and their current market on a scale of 1 to 5 (dead to booming). It’s not a scientific sampling, but it’s good anecdotal evidence of how remodelers are faring nationwide and, more importantly, what they perceive to be the prospects for their markets in 2009. Two trends stand out in the results. One is the general sense of optimism. This is not surprising, given that remodelers are always hopeful about the future (especially when talking with a magazine editor). But it doesn’t mean that things aren’t as bad as the news would have us believe; they are, but not everywhere and not for everybody. Not yet, anyway.
The other trend was that many of the company owners we talked with believe that their companies are outperforming their market. It might be that the other shoe has yet to drop. Or maybe they’re doing something right. We’ve mapped several examples from around the country.
A. Mercer Island, Wash.
Call volume is down and a few projects have scaled back, but "we're very busy and doing very well" at Peter Davis Builders, says the eponymous owner of this 22-employee, 27-year-old company in the Seattle market. "Our last two months have been our second and third busiest months ever." While $1 million-plus jobs aren't as plentiful, experienced trade contractors are. "I get three to five calls a day from subcontractors looking for work," he says.
B. Sacramento, Calif.
An eye-catching new logo and an established presence in key middle-class neighborhoods have preserved D&J Kitchens and Baths' volume at $2.2 million the last three years, and "we're on track for $3 million in '09," says co-owner Darius Baker. Builders" aggressiveness has proven his gain. "Developers got crazy and were gouging people on these inexpensive, mass-produced cabinet lines. They call me and say, "My home is six months old and I want this junk out."
Despite 2008 being "a banner year with banner profits," green remodeler Michael Anschel of Otogawa-Anschel says that a smaller backlog (three to four months' worth, compared with the usual six to eight) "scares us a little. However, we are maintaining a positive attitude and going back to basics with our marketing and client relations."
Even with a $700,000 backlog and an undiminished lead volume and closing ratio, Leslie King of Greymark Construction is wary of 2009. To be limber, she's prepared three budgets: $2 million (same as '08), $2.5 million, and $3 million. Noting "price-sensitive" clients and much smaller jobs, she's dropped her markup a bit and ramped up marketing. She's also watchful of the new competition: More than 100 home builders have recently joined her Remodelers Council.
E. Toledo, Ohio
Educating prospects has become a crucial strategy for Chuck Fannin of Fannin Remodeling, whose biggest threat (besides an ailing job market) is builders who tend to bid low; unrealistically low. Recently, he lost a job he had priced at $234,000 to a builder bidding $180,000. Fannin later called that homeowner and learned the total came in "exactly what I bid," he says.
Diversification is word one for Brad Cruickshank, CEO of both Cruickshank Remodeling, which tends to work in very high-end neighborhoods, and Reliant Commercial Construction, a commercial handyman business in five states. As big residential remodeling projects have slowed, "I tell my people we're trying to cobble together a bridge to get to a better time," he says. That means more insurance work and a tightening network of trade contractors, cabinet suppliers, real estate agents, and others.
G. Winston-Salem, N.C.
It's hard to tell whether homeowners are remodeling less or remodelers are losing more jobs to builders, says Erik Anderson of Anderson-Moore Builders. Company revenue dropped about 15% in 2008, but its good name in high-end markets — combined with some diversification and a willingness to "value-engineer" project costs as budgets demand — keep its co-owner optimistic about the year ahead.
H. Great Falls, Va.
After years of rocketing home values, uncertainty hangs over this posh D.C. bedroom community. "I think they're all watching to see what happens," says Jeff Rainey of Home Equity Builders. Not long ago, clientele included "serial remodelers" who "pulled the trigger on the projects they wanted when they wanted it. Now they're thinking, 'How long am I going to be in this house?'" Small jobs have been one silver lining; Rainey's handyman business grew more than $100,000 in 2008.
I. Londonderry, N.H.
Home shows have proven "awesome, amazing, fun" for Jan Jacome of Crossroads Contracting, and she's exhibiting at six such events in 2009. But job sizes are smaller, and the lurching economy has her in an edgy state of being "two jobs away from despair or breathing room." Her first-ever layoffs, in early December, reflected her growing conviction that careful job-costing analysis reveals "who's making the company the most money." And who's not.