An article from today’s WSJ that I found interesting and figured I’d pass it along… <!—-><!—-> <!—->
Why Homeowners Are Raising the Roof<!—-> <!—->
By M.P. McQueen<!—-> <!—->
People who refrained from splurging on big home-improvement projects during the housing boom are reaping the rewards now.<!—-><!—->
Depending on the region and the job, some homeowners are paying as much as 20% less for home-remodeling projects than they would have a few years ago. Many contractors are willing to accept smaller jobs and “handyman” projects that they used to snub. And more projects are being delivered on time and on budget—a stark contrast from the boom years. <!—-><!—->
Kim and Chandra Sobieski of <!—-> <!—->Cat Spring<!—->, <!—->Texas<!—-><!—->, considered expanding their home two years ago, but thought the contractor’s $380,000 estimate was too high. Earlier this year, Mr. Sobieski, a 54-year-old retired title-company executive, called the same contractor and got a quote for a slightly revised expansion for 20% less. The couple wound up paying $300,000 to add 1,500 square feet to their old 3,400-square-foot home, including installing a new roof, converting a garage to an entertainment room and adding a new garage.<!—-><!—->
“We caught them at a time there was more downtime, and it seemed to work to our advantage,” says Mr. Sobieski, who adds that the project was finished ahead of schedule. <!—-> <!—->
The Sobieskis’ contractor agrees that timing made the difference. “Three years ago, if you asked someone for a discount, they’d laugh at you,” says Jeff Hunt, vice president of Brothers Strong, the <!—-><!—->Houston <!—-><!—-> firm that did the project. <!—-><!—->
Remodeling prices are down an average 5% to 10% across the U.S. from their peak, firms say, largely due to bidding wars among contractors idled by the housing slump and lower costs for some materials, such as plywood, lumber and insulation, because of lower global demand. <!—-><!—->
The remodeling industry has also been hurt by sluggish sales of new and existing homes; most remodeling is done within 18 to 24 months of the purchase of a home, studies indicate. Tighter credit and falling home values also hurt the industry, as many big jobs are financed with home-equity loans or other borrowing. Some new-home builders are now competing for home remodeling jobs, helping to force down prices even more. <!—-><!—->
In the year ended the first quarter of 2009, the most recent data available, $118.2 billion was spent on home-improvement projects, down from $146 billion in the year ended the third quarter of 2007—the national peak of remodeling activity—according to a report issued this month by the Harvard Joint Center for Housing Studies. The center said it expected spending declines to moderate through the end of this year and begin to rise early next year. <!—-><!—->
To be sure, there are still remodelers who aren’t cutting prices drastically. Building materials represent only about one-third of their costs, and taxes and insurance premiums, including workers’ compensation, have continued to rise. Fuel prices also remain high, and prices for some petroleum-based building products, such as asphalt shingles, rose in 2007 and 2008, although that trend started to reverse last spring, according to the National Association of Home Builders.<!—-> <!—->
Bristling at Homeowners<!—-> <!—->
Some contractors bristle at homeowners who demand deep discounts. “Why are you asking if you can get a $300,000 project for $175,000 when nothing has changed except that you can’t get financing for it?” asks William Carter, president of the National Association of the Remodeling Industry and a certified kitchen and bath remodeler in <!—-> <!—->Sacramento<!—->, <!—->Calif.<!—-><!—-> He acknowledges that he has lost several jobs because he refused to lower his fees by more than 5%. <!—-> <!—->
The lowest bidders don’t necessarily offer the best value, Mr. Carter says. Some bid too low and then can’t finish the job at the quoted price, leading them to cut corners, ask for more money or even abandon the job. Some are moonlighting amateurs or otherwise unqualified, he says.<!—-> <!—->
Local Better Business Bureaus typically receive thousands of complaints every year about construction and remodeling contractors, says Alison Southwick, a spokeswoman for the national Council of Better Business Bureaus Inc. in <!—-><!—->Arlington<!—->, <!—->Va.<!—-><!—-> Homeowners should get multiple bids and ask to see several recent examples of builder’s completed work and talk to previous clients before signing a contract, she says. (You can find reliability reports for local contractors at www.bbb.org.)<!—-> <!—->
Some established contractors who specialize in renovations are skeptical of moves by new-home builders to seek remodeling jobs. Remodeling contractors contend builders often win jobs by bidding low, but their estimates are based on their experience erecting houses on vacant lots, not working in homes with decades-old wiring occupied by arguing couples and wandering pets. <!—-><!—->
“You can’t do a $100,000 project for $69,000, but they don’t realize it until they are two-thirds through,” says Rocco Sinisgalli, president of Oneida Builders in Dunwoody, Ga., a remodeling firm that faces increasing competition from local homebuilders. Remodeling prices in his area are down about 10% to 12% from 2006, says Mr. Sinisgalli, who also runs a course in remodeling for home builders.<!—-> <!—->
David Crowe, chief economist of the National Association of Home Builders, confirms that more home builders are seeking remodeling work, and that remodeling contractors—who are also represented by the organization—were concerned about it. <!—-><!—->
“I think it’s possible that the smaller builder that has not done remodeling in the past could be mistaken in the amount of effort it takes to remodel an existing structure,” Mr. Crowe says. “But I don’t think that is widespread.” <!—-> <!—->
Occupied Houses<!—-> <!—->
Michelle Aube, 42, says she and her husband relied on a custom new-home builder to redo their 3,000-square-foot house in <!—-><!—->Fairfield<!—->, <!—->Conn.<!—-><!—-> in 2007, and the project took much longer than the builder said it would take. She says the builder seemed unfamiliar with the tribulations of renovating an occupied house.<!—-> <!—->
“I chose him because out of three contractors he gave me the best bid,” Ms. Aube, a homemaker, says of the $200,000 remodel and expansion. “It was supposed to be a six-month job, and it ran into a nine- or 10-month job,” she says, but it was “worth it in the end.”<!—-><!—->
Other homeowners have gotten deals from established remodeling specialists because of the tough economy. Jessica Levy Buchman, a 39-year-old executive at a real-estate brokerage, estimates she saved 20% to 25% off prerecession prices when she and her husband renovated a house they bought in December in <!—-><!—->Sag Harbor<!—->, <!—->N.Y.<!—-><!—-> Some roofers wanted $7,000 for a repair job. She paid $1,500, which wasn’t even the lowest bid. <!—-> <!—->
Says Ms. Buchman, “I feel we are getting rewarded for riding it out and having the guts to spend a little money.” <!—-><!—->
<!—-> <!—->
Replies
Interesting...especially from the journal.
Unfortunately, I don't see that happening across the board as I cannot afford to lower any of my prices based on the economy. If anything, I might have to raise them to pay for the cost increases in materials.
I wonder of the folks who saved $80k were in essence almost the potential victims of a rip off guy who may have overcharged them if they would have paid that amount?
...and now that I re-read it again it would have been $300k to add 1,500 square feet! WOW! I am doing a 1000 sq ft addition now for $95k!!! Maybe I DO need to raise my prices as I would still be lower than what they paid!!! :)
Yep. I have trouble feeling $orry for anyone who puts on an addition that is larger than my entire house and costs almost by itself as much as my house and property are worth together
Friggin' McMansion Mentality ain't gonna die easy....
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
Agreed. Says the guy is 54, so I'm betting they probably don't have any kids at home, or if they do, they are gonna be moving out soon. We have 1800 square feet that I think is too big.
Sounds like he was a flash in the pan. 54, no kids left, not working.
Sheet. I'm 57; my son is 11; and I'm gonna be banging nails till the cows come home....
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
Did you see, they slightle changed the project. Bet they did away with some of the high end stuff. But then again, 200sq ft is still pretty good money for an addition, I am assuming without the kitchen.
Yep, noticed that. Wonder what essentials of life they bravely gave up.
I'd like to have a billion square feet to store all my junk, too. Be real nice to have my own indoor lake so I could take a morning wake-up splash when Mama Nature is on the ragg.
Maybe I should just take out a fifteenth mortgage and buy Manitoba or something. What da hell, if I don't like it, I can flip it after a coupla months and make a bundle anyway....
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
It's funny Dino, the only time I make money i n RE is to own it for a long time. Then again I don't like living in a subdivision so I guess that is not to suprising.
I think on the fifteenth mortgage, I might just give up!!!>G<
Hunh. I'm still living on/in the first piece of real estate I've ever owned. And yup, if I were to sell it, I'd make money... but not enough to rebuild in this area.
Bought in 85 for 50% down/50% over 5 years.; paid off the mortgage in 90. Rebuilt it in 95 by taking a new mortgage to cover the materials; I did all the work except excavation and concrete. Market value now is about 14-15x what I paid for it.
If I ever sell it, I figure I might get paid for my labour, LOL....
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
"If I ever sell it, I figure I might get paid for my labour, LOL...."Taxes will take that, but you should just consider it "rent". ;)Iman "insufferable warmongering Neanderthal"
Hope not/think not; here in Canukistan, no capital gains tx on a house you live in for 2+ years.
Otherwise, nobody who'd owned his home for more than 20 years could ever afford to sell it....
Dinosaur
How now, Mighty Sauron, that thou art not broughtlow by this? For thine evil pales before that whichfoolish men call Justice....
Eye bee lernin sumptin ever day
The way I read the article, they added 1500 square feet and also converted existing space. Based on my experience, they probably worked on 2500 of the 3000 sf and were around $120/sf.
I frankly I would not be at all suprised if it did cost $200/sf. Here in Austin, the city makes you update all your infrastructure if you do any significant level of remodel including new sewer lines, new water supply lines, new water meters, new electrical service, build a sidewalk infront of your house and upgrading all energy and electrical components of a house. The rule of thumb is touch a wall it must meet current code.
I have bid on projects where the infrastructure improvements alone were $45k before we even entered the envelope of the house.
Just my $0.02 worth
Bruce
We have 1800 square feet that I think is too big.
Kids are gone, house is only 5300 sq ft, plus a few thousand of sheds......
Still need more space though <G>
Only downside is property taxes.....
Need to talk to Craig about how to get a few Memphis warehouses cheap???
Waiting until recently for large projects is ONE thing that we (and most of those in our neighborhood) managed even considering most of us match my tag line.
"The lowest bidders don't necessarily offer the best valu"
And sometimes they do :) I got a deck put on a couple years ago it was honestly half the cost of what another guy said he'd do it for. It hasn't collapsed yet and is doing just fine.
300k for 1500 square feet is nuts. I hope it's truly fantastic.
What good is it getting 20% or more off when a) contractor is snake-oil approved, b) contractor is a fly-by-night, c) retracts their expertise statement, or d) has no courage, skills, confidence to replace a window.