Housing Recovery Spurs Pickup in Remodeling
More American homeowners are repairing and remodeling their houses again as the overall housing market begins to show signs of life.
"It had been quite dismal for most remodeling contractors," said Tom O'Grady, president of O'Grady Builders, based in Drexel Hill, Pa. "I had gone two years without doing a significant home addition. Very few inquiries even. And now I've got two. That tells me it's coming back."
Much like the recovery in the overall housing industry, the pickup in remodeling comes as home prices have staged a convincing bottom in most of the country, said O'Grady. Just as falling prices discouraged homeowners from repairing or expanding a house, rising prices have given them confidence to undertake a delayed project. Rising home equity is also helping to finance the work, he said.
The remodeling industry is also benefiting from the need to fix up the swollen inventory of foreclosed houses in many distressed markets, according to a report released Wednesday by the Harvard Joint Center for Housing Studies.
"All those homes that have gone through foreclosure or short sales are now coming back on the market," said Kermit Baker, a senior fellow at the center. "In a lot of cases these properties have been abandoned for the last few years. So you've got some properties in pretty tough shape."
Until about a year ago, the remodeling industry was also in tough shape. From a 2007 peak of more than $325 billion, revenues had fallen by 16 percent in 2011. At the height of the housing boom, home remodeling accounted for some 327,000 construction industry jobs before falling to 216,000 at the start of 2010. Employment has been gradually coming back but closed out last year at 250,000.
O'Grady had five full time employees on his payroll at the peak. Now he has two.
"I don't think anybody in our business is saying 'I think it's time for me to go back to my level of employment that I had back in 04-06,'" he said. "I think a lot of remodeling contractors are going try to stay away from having a full stable of employees because they felt so bad about letting them go."
O'Grady, who heads a research committee for the National Association of the Remodeling Industry, said two-thirds of the trade group's members expect to see a continued pickup in demand this year.
Some of that demand continues to come from homeowners looking to improve the energy efficiency of their homes, a spending category that held up well through the downturn, said Baker. That was partly spurred by government incentives during the economic stimulus program along with worries about volatile energy costs.
Some contractors in areas that sustained heavy damage from Superstorm Sandy told a recent NARI survey they were seeing an uptick in business for storm-related work.
Older homeowners fixing up their home for retirement are also a major source of new business for the remodeling industry, said Baker.
"Their share of spending went up pretty dramatically because they have more equity in their home compared to younger households," he said.
That trend is expected to continue, as many aging baby boomers decide to retrofit their homes to better accommodate their retirement years.
Younger households are also expected to move ahead on long-delayed projects to accommodate growing families. Some deferred repairs can only be postponed for so long.
As long as the overall economy continues to improve gradually, O'Grady expects remodeling demand to continue to pick up.
"There a whole lot more feeling of certainly that the economy is on the rebound and homeowners have more certainty about their ability to retain their employment," he said.