ALBUQUERQUE, N.M. — Residential remodeling contractors are banking that Albuquerque homeowners will continue making improvements to their existing homes even as they shy away from new construction.
After three years of slumping business, the National Association of Home Builders managed to find a few reasons for optimism at its annual meeting in Florida in mid-February, according to press coverage of the event by the Orlando Sentinel.
“We think we are going to see better numbers coming out of the industry as we move into the second half of this year and into 2013,” said Kermit Baker, a senior fellow at Harvard University’s Joint Center for Housing Studies.
Nationally, the Association is predicting an almost 9 percent increase in remodeling this year and more than an 11 percent jump nationwide in 2013, according to the Florida newspaper.
In Albuquerque, the collapse of the mortgage lending bubble has hammered the remodeling industry, concedes Debra Speck, chair of the Home Builders Association of Central New Mexico. Yet, at the same time, the bursting bubble has forced the industry to streamline its companies to offer better pricing, Speck said, even while voicing a caution that low bids from unlicensed contractors can lack warranties, insurance coverage and safety features.
The competition for new remodeling projects is fierce as the survival of the majority of contractors is now through remodeling. That’s an abrupt about-face from the construction peak three years ago when new home builders and remodelers were riding the bubble as separate industries. Some remodelers have benefited from the glut of previously foreclosed homes needing repairs.
“We’ve seen several major component changes to the remodeling industry,” said Speck, a co-owner of local design and construction company Jade Enterprises Inc.
“First off, more consumers are reluctant to spend their hard-earned dollars on a glamorous remodel project,” she said. “Homeowners are now faced with the fact that the funds they once had socked away have dwindled as they deal on an individual basis with the struggling economy. Although the consumer demand for remodeling remains relatively strong, the reason behind the desire to remodel has changed dramatically as the homeowner finds a well-maintained, energy-efficient home is more important than a large, fabulous one.”
Energy-conservation remodeling projects often include roof repair or a new roof, restuccoing for both aesthetics and concern about leaks, and a tighter envelope (increased insulation, for example) that will reduce heating and cooling bills, said Speck.
In the past half year, Albuquerque’s Pennington Builders, a family-run remodeling business, has seen a trend of greater client interest in smaller projects such as kitchens, bathrooms and small additions, rather than large-scale, whole-house remodels, says Ryan Pennington.
Still, other clients, resigned to remaining in their existing home “know what they want and are willing to pay for it,” said Pennington.
“Right now, with the way home prices are, homeowners will probably get the most bang for their buck if they pick a project that suits their specific needs and wants, and not to focus so much on trying to turn around and get any profit out of a remodel,” he said.
Financing for remodeling projects remains a major detriment to remodeling, both contractors agree.
“With many homes in upside-down mortgages, the likelihood of a loan to remodel is almost zero,” said Speck. “New programs for lending, some offering as much as 110 percent of the remodeled value of the home, are helping to address this issue,” she added.
“Not only is financing harder to come by, but a lot of the people who have the money or access to financing are still scared to spend it or obtain financing for further debt,” said Pennington.
The National Home Builders Association reports that total remodeling and home improvement expenditures now add up to more dollars than new home construction. Remodeling accounts for close to 70 percent of U.S. residential construction expenditures.