Remodeling, used as a catchall term for any kind of work on a home, has survived the downturn in housing somewhat diminished, but still a driver of residential construction activity.
“The remodeling industry generates close to 2 percent of the national economy,” said Larry A. Chavez, owner of DreamStyle Remodeling in Albuquerque. “It’s a percentage that doesn’t vary much, no matter the economy. I find that pretty interesting.”
Home improvement and repairs fared dramatically better through the downturn than homebuilding. Based on building permits issued from peak to trough in the city of Albuquerque, home improvement and repairs dropped 37 percent, while homebuilding plunged 87 percent.
The repair and replacement part of the equation is what’s provided some buoyancy to remodeling during the recession and its lingering hangover.
“There’s a lot of maintenance-type stuff getting done,” said Dominic Padilla, president of the local Remodelers Council. “It’s not just replacing roofs and windows. A lot of minor kitchen remodels are basically maintenance. You don’t replace the cabinets, just the (cabinet) doors. You replace an old Formica countertop.”
Before the downturn nationwide, homeowner spending was almost equal between discretionary projects and replacement projects, says a report titled “Emerging Trends in the Remodeling Market” by the Joint Center for Housing Studies of Harvard University.
In 2013, discretionary spending had fallen to 30 percent of the total, while replacement spending had increased to almost 50 percent, the report says. The remaining roughly 20 percent was disaster repairs and property improvements outside the principal residence, such as landscaping and outbuildings.
Discretionary projects are described as “remodels and additions that improve homeowner lifestyles but can be deferred when economic conditions are uncertain.” On the other hand, replacement projects “affect the safety and efficient functioning of the home,” the report says.
The bread and butter
The most popular discretionary projects are kitchen and bathroom remodels, which are the bread and butter
of the remodeling business. In 2013, the cost of a kitchen remodel ranged from about $3,200 to $19,000, while a bath remodel ranged from about $1,600 to $8,800, according to the Harvard report.
DreamStyle Remodeling, perhaps best known for marketing Renewal by Andersen replacement windows, launched a kitchen and bath remodeling division in early 2014 to tap into the demand. Its new showroom at 1460 N. Renaissance NE, which opened in September, features model kitchens and baths.
“We’re learning it has great potential,” Chavez said.
While most kitchen and bath remodels have a cosmetic element, the goal is usually better functionality and efficiency, said Kuper Donaldson of KD Builds and Fine Woodworks.
Padilla, whose company is There’s No Place Like Home Design and Remodeling, said, “Older home designs often didn’t maximize space very well. It’s repurposing space the homes already have rather than adding on.”
Homeowners who undertake pricey discretionary projects in today’s housing market – say $25,000 and higher – are not looking for a return on their investment or at pumping up their home’s value, said Paul Kenderdine of PWK Inc., who specializes in big ticket remodels.
“The remodels are for living a lifestyle,” he said. “They’re looking to meet certain needs or check off a wishlist.”
The consensus for a common home improvement in the Albuquerque metro area that doesn’t really show up on national popularity lists is an outdoor living space, hardscaped and shaded in some fashion. A classic example is a portál, or covered porch, that lends itself to the flat roof lines common in the metro, Donaldson said.
Permit or no?
Building permits are not needed for home improvements that are largely cosmetic, such as painting, tiling,
flooring and carpeting. A minor kitchen remodel – new cabinets and countertops – won’t need a permit unless fixtures are relocated or the space reconfigured, said Land Clark, Albuquerque’s chief building official.
Permits will be needed if an addition is built onto the house, if electrical and mechanical work is involved and for most plumbing installations. There are a lot of variables involved, so Clark suggests a homeowner go over his or her plans with staff at the building safety division’s permit counter at 600 2nd NW.
Licensed contractors should know when a permit is required, thus a homeowner may want to consider those permit thresholds when planning a project. Donaldson advised that even simple home improvement projects
have a way of snowballing into permit territory.
“One little thing leads to another,” he said. “You have to get this done to get that done to get this done.”
A building permit can serve as a form of consumer protection for a homeowner, Clark said.
“Using a licensed contractor that is issued proper permits and requests required inspections will give the owner some protection that the construction is code compliant,” he said.
Baby boomers born between 1946-64 rule the home improvement world by accounting for almost half of all spending, according to the Harvard report. Gen Xers, born between 1965-84, are in their peak spending years and account for just over a third.
“I haven’t worked for anyone in my generation,” observed self-described Gen Xer Padilla.
Boomers, due to long-term homeownership, in general survived the housing downturn better than most others. In addition, with conventional investments, such as stocks and bonds paying off, boomer retirement portfolios have regained value lost during the recession, Kenderdine said.
The upshot is boomers tend to be more optimistic and willing to spend on their homes than younger generations, he said.
The millennial generation, born between 1985-04, has been slow to get into homeownership for a host of reasons. Because of their sheer numbers – millennials represent a slightly bigger population bubble than the boomers – they’re the biggest reason for optimism about remodeling’s future, the Harvard report says.
Remodeling is extremely fragmented, populated by small businesses with an average of 3.3 payroll employees as of the second quarter of 2014, the report says.
“The average residential remodeling contractor with a payroll operated on even a smaller scale than the typical business serving the similarly fragmented accommodations and food services sector,” it says.
The ranks of remodelers swelled at the start of the housing downturn when both homebuilding companies and their laid-off supervisors used remodeling as a fallback. Then the ranks thinned because there wasn’t enough remodeling work to go around.
“There still seems to be a lot of fish in a small pond,” Padilla said.
Referrals and new projects for repeat customers are what enable many remodelers to continue working, Padilla said. Donaldson said he’s yet to work on a home improvement project that didn’t involve some sort of referral.
Although specific data for remodeling aren’t available, construction in general has an aging workforce that has led to alarms raised about potential for a labor shortage in the future.
“From 2002 to 2013, the share of the construction workforce aged 55 and over increased from under 9 percent to almost 16 percent and the share of the workforce under age 35 declined from 44 percent to less than 35 percent,” the Harvard report says.