At On the Spot Home Improvements in Saddle Brook, N.J., homeowners who got bids on renovation jobs a couple of years ago are moving forward with those projects.
And, after a year he called the worst in memory for the renovation business, Dumont contractor Dave Goscinski is feeling more optimistic.
“There’s just a feeling in the atmosphere that people are ready to spend money,” said Goscinski, of JJED Remodeling.
Hammered by a brutal recession, tight credit and a sluggish housing market, the remodeling industry is seeing hints of a revival this spring.
Harvard’s Joint Center for Housing Studies recently predicted that spending on home improvements in the U.S. will rise almost 5 percent this year – the first upturn since 2006.
“The gradual recovery in the broader economy should encourage more remodeling spending by homeowners,” said Nicolas P. Retsinas, director of the Joint Center for Housing Studies.
And a first-quarter survey for the National Association of Home Builders found that more contractors are reporting an increase in work, as well as more requests for estimates on future jobs.
Certainly, times are still tough; and no one expects a powerful rebound. At Len Van, for example, homeowners are calling again, but they’re not seeking estimates on large, high-priced jobs like home additions.
“Most of the calls are for smaller renovations – things like decks and bathrooms,” said Steven Van Der Stad, 38, of Len Van Builders, a company his father started in 1968.
“The scope of the work has changed dramatically – from bigger projects to smaller projects,” agreed Bert Tallaksen, owner of Tally’s Construction Co., a 22-year-old Tenafly, N.J., company. And just getting the work is “very, very competitive.”
“Five years ago, if you called someone back, you had the job,” Tallaksen said. “Today, everybody’s looking for a job. Your numbers have to be very competitive. Pricing is back to where it was seven years ago.”
The remodeling industry was hurt by both the poor economy, which forced homeowners and businesses to watch their spending, and the housing market’s woes. A lot of renovations follow home sales, when new owners make improvements.
“The remodeling industry has been caught in the crossfire of the housing downturn,” said Kermit Baker, an economist with the Joint Center for Housing Studies.
“Construction had by far the deepest drop in employment of any sector, and the highest unemployment rate,” said Ken Simonson, chief economist for the Associated General Contractors of America.
To deal with the downturn, contractors have laid off workers, cut their hourly labor charges or trimmed profit margins.
“I cut overhead and lowered my profit margins to keep my guys working,” said Anthony Pizza, a Rutherford, N.J., builder and remodeler who was able to avoid laying off any of his 10 employees.
Michael DeMarco, owner of On the Spot Home Improvements, said that maintenance jobs – gutter cleaning, window washing and so on – stayed steady during the recession, while bigger jobs were tougher to come by.
But now, DeMarco said, customers are deciding to move forward on projects that On the Spot gave bids for a couple of years ago. The March storm, which sent trees into roofs and siding, has also boosted business.
Complicating the picture are new federal regulations on the safe handling of old lead paint in homes where young children live. The new rules require contractors to take a one-day training class and seal off and clean up the work site according to Environmental Protection Agency standards. Contractors say the new rules will add to their costs, forcing them to raise prices.
“We’re going to lose a lot of elective construction jobs,” said Dave Windecker Jr. of Windecker Construction in Fair Lawn, N.J.
Baker said that homeowners have been reluctant to spend on improvements for a couple of reasons. For one thing, it’s harder to get a home equity loan now than it was a few years ago. Banks are not as free with money, and many homeowners have little home equity to borrow against.
“They’re converting to a cash economy,” Baker said. And he said that when homeowners have to write a check for the full price of a renovation, they’re more likely to ask: “Do we really need that now?”
Moreover, falling house prices mean that homeowners might not get much of a return on expensive renovations when it’s time to sell.
“Your house is not worth what it was a year or two ago, and might be worth even less next year; is that the kind of situation where you want to invest in your home?” Baker said.
Still, Baker said, the Harvard housing center is predicting an uptick in renovation spending this year, in part because sales of existing homes have been boosted by a federal home buyers’ tax credit, which ended April 30.
Homeowners are focusing on “no-frills” maintenance projects such as roof repairs, according to contractors.
“I used to do a lot more luxury projects,” Pizza said. “Now people are doing more of the basic necessities.”
And they’re watching pennies on every job. For example, Van Der Stad recently drew up estimates on two deck projects, basing his bids on composite plastic/wood, which is low-maintenance and lasts longer than wood. But the customers said they wanted lumber, which is much less expensive.
“They didn’t want to spend that much,” he said.
“Everything is based on price,” said Windecker. “It’s not based on references; it’s not based on how good a job you did for someone else.”
It’s not just homeowners who are cutting back. Commercial renovations have also been affected. Windecker, for example, used to build office interiors for Countrywide Home Loans. That business is gone; Countrywide was taken over by Bank of America as the mortgage industry faltered under the crushing weight of bad loans.
And during the recession that started at the end of 2007, there was little demand for new or renovated office space.
“There are no new businesses opening,” Windecker said.
The downturn in the retail sector has also meant a steep drop in work building or remodeling stores, Simonson said.
“All of that activity really dried up,” Simonson said.
Simonson expects that commercial renovations won’t pick up until 2011, with hotels leading the way, as they make updates that were deferred during the recession.
Distributed by McClatchy-Tribune Information Services.