Entries Tagged 'Remodeling' ↓

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Face it, the odds of energy costs coming down in the near future are nill. Combine that with a stagnant housing market, a glut of starving construction workers, and personal incomes for most not going down, you have the recipe for a surge in Green Remodeling.

The Green movement has always been a fringe element of society as long as it was not affecting the pocketbooks of the American consumer. We tend to think right but act based upon our pocketbooks and what is good for our families.

However, when energy prices soar, the right thing to do for our families is now concentrate on energy efficient choices that will benefit us all. Add to that technological innovations that have improved efficiency while lowering cost on energy savings projects you have the perfect storm.

While things are slow in the construction world and we have some dollars to spend on home improvements, here are a few ideas from the NAHB that will help you save money with green remodeling.

What may be a sign of the economy is slowing down overall, a new report released by the Harvard University Joint Center For Housing Studies has released a report that home remodeling is slowing down.

There has been a great deal of investment in properties over the past decade as people have remodeled and added the newest and best gadgets to their homes. The rational is that housing prices were increasing and that homeowners were just adding to the value of their home. But with a slower economy and stagnant or declining housing prices this trend may be slowing down.

Falling consumer confidence and a weakening economy are inhibiting remodeling spending, which is expected to fall by an annual rate of 4.8% through the end of 2008, the center said Thursday. That is steeper than the 2.6% annualized decline the center projected through the third quarter when it last updated its Leading Indicator of Remodeling Activity in January.
The center, which develops its quarterly indicator from government data and surveys, estimates remodeling spending declined 1.7% in 2007.
“Spending on home improvements continues to be sluggish, as homeowners respond to falling home prices,” said center Director Nicolas P. Retsinas. “The fall-off in pending home sales suggests a long and slow recovery.”  via Wall Street Journals Development Blog

Many who are watching the housing slump are keeping an eye on Lowes and Home Depot. The two home repair giants are great indicators on how consumers are spending on home repairs and upgrades. Lowes surprised analysts showing improved earnings for the second quarter up to 67 cents a share from 60 cents the previous year.

The improvements came from the parts of the country that did not have the huge run up in housing appreciation. California, Florida, and the Northeast were the worst markets for Lowes, while most of the rest of the country showed gains in sales.

Lowe’s said sales were weakest in the cool real estate markets in California and Florida. Sales in the Northeast, though bad, were “showing encouraging signs of improvement,” Lowe’s chairman and chief executive Robert A. Niblock said in a statement. Stores in much of the rest of the country, however, posted sales increases.
The biggest surprise for many analysts was wider profit margins. Reasons for the better profits, according Lemos: Investments in distribution systems are paying off; less was spent on promotional sales; sales shifted to a more profitable product mix; and also theft — what retailers call “shrinkage” — was down.
More good news: Lowe’s expects same-store sales to stop sliding and come in flat in the third quarter.  via Business Week

College housing typically is fairly expensive, and if you live in a city that has high housing costs, it can be prohibatively so. There is a new trend on the horizon for properties near college campuses that have a shortage of housing on campus, mini-dorms. The idea is that you take a pre-existing single family home and remodel it so that it has many individual dorm style rooms with a common area. The resulting housing can accomodate more students at a lower cost near the university.

The 3 un-named developers are onto something here. Neighbors are not thrilled with the idea, but this is a great free market idea in my opinion and one that should be explored by those who specialize in near campus student housing.

According to NBC 7/39, the people behind this and similar conversions are three recent college grads, and they have plans to buy even more property.

Residents in Pacific Beach met with City Attorney Mike Aguirre and City Councilman Kevin Faulconer Tuesday night to voice concerns.
The issue in their neighborhood is a home being renovated in the 1200 block of Chalcedony Street. The three-bedroom house is being converted to a nine-bedrooms. The city approved a permit to add the extra rooms to the home, but some homeowners said there needs to be restrictions for single-family homes.
The conversion of single-family homes into so-called mini-dorms has been a hot-button issue in the College Area, near San Diego State University. The owners buy a home, add rooms and rent it out to multiple tenants, usually students.via KNSD

Sometimes you can not win for losing. Contractors and builders who got used to the perpertual demand for their labor are now getting a strong dose of reality. They got comfortable quoting high rates and long lead times to build up a constant supply of work and a new truck every year. Now it may be time to pay the piper.

With the housing slowdown many of these tradesman are now stuck in the middle. The homebuilders are not putting much new inventory on the market so the subcontractors are not in demand for new construction. “Residential specialty trade contractors, such as carpenters, drywall workers and flooring installers, cut payrolls by 17,500 last month, the biggest decline in six months, after adding about 1,900 in August, the Labor Department said.”(via the Chicago Tribune)

Typically when new construction slowdowns happen, these guys flood the remodeling market to get work lowering the rates that can be charged for a job. The contractors who have been doing remodeling have been able to charge above average rates. The combination of scarce labor and increasing housing prices had homeowners not wanting to quibble about price. There was enough work available that they could not take the risk of the contractor leaving them and the projects not done. So the homeowner paid top dollar and waited patiently for the work to be done.

Also, when a housing slowdown happens, the cost of raw materials drops as demand drops, so the re-modelers have the opportunity to buy their supplies at a less expensive price to keep their profit margins steady. But not for 2006.

Boosted by higher metals, concrete and fuel prices, construction input prices jumped 8.8% in August from the same month a year ago. The price index for highway and street construction jumped 13.8%, and home construction gained 8%, said the contractors group’s analysis of Labor Department data. via the WSJ

So here we have the triple threat for remodelers occurring.

• New construction slows down and the labor market is flooding with qualified laborers who will lower rates that can be charged for labor. The phrase “every yahoo with a pickup” opening their own business will be heard often.
• Housing prices declining making homeowners less likely to invest in updating and investing in their property.
• Construction supply costs rising significantly above the inflationary rate eating into the profit margin of jobs bid.

So who will win. It will be the folks that always have won. The remodelers who were fair and honest when business was rocking and rolling. The ones that gave the customers an honest time frame for when they would come back and do the work and charged a honest price. They will have the good will on the street. The word of mouth references that will make their businesses grow and succeed.

The remodelers that lied to the customer to get the job about when they would show up, dropped cost increases on the customer, and generally give the business a bad name will be hurting. They abused the system when things were doing well. Now, when the market slows down, they will not have the references to get new work and grow their business. Odds are they will be squeezed every which way, and if they fall into their old tricks, will be replaced by the new construction guys who are looking for any work.