Finally, the Contractor Will Take Your Calls

For homeowners who have been putting off remodeling projects, now may be the time to get started. Sluggish home-building demand is pushing down the cost of construction materials and spurring remodelers and other professionals to take on smaller projects - and sometimes cut fees.
By: Sara Schaefer Munoz: The Wall Street Journal Online
For homeowners who have been putting off remodeling projects, now may be the time to call the contractor.

While the current housing slump isn't cheering investors, it is making remodeling a kitchen or bathroom or adding an addition easier and cheaper. During the booming real-estate market of the past several years, people wanting to remodel often found themselves waiting months for contractors to take on lower-ticket jobs - if the contractors would take them on at all. Now, sluggish home-building demand is pushing down the cost of construction materials (prices for lumber are near their lowest level in a decade) and spurring contractors to take on smaller projects - and sometimes cut fees.

Custom and speculative builders are also starting to take on renovation jobs, picking up work they may have passed over just a year ago. In Tucson, Ariz., Richard Fink, co-owner of Becklin Construction LLC, a custom home builder, used to do a few remodeling jobs as favors to former clients; now remodeling has grown to half his business. Samm Jernigan, a high-end custom home builder in Wilmington, N.C., said earlier this year he started "aggressively pursuing" remodeling projects for the first time, and John Diament, a home builder outside of Philadelphia, says two months ago he started asking architects to send big remodeling jobs his way.

"It's good news for the consumer if you've got a lot more people seeking projects," says Gopal Ahluwalia, staff vice president of research for the National Association of Home Builders.

Meanwhile, prices of framing lumber have fallen dramatically, says Shawn Church, the editor of Random Lengths, an industry newsletter based in Eugene, Ore. The composite price per thousand board feet of framing lumber was $274 this week, compared with $375 a year earlier, according to data from Random Lengths. Ken Simonson, the chief economist for the Associated General Contractors of America, a trade group in Arlington, Va., says he expects to see a roughly 10% drop in prices of gypsum and construction plastics when government price data are released later this month. Economists say the lower material costs could save homeowners an estimated 5% to 10% on additions.

The falloff is largely because of slowing new-home construction, which for several years had driven up the cost of materials. Housing starts dropped 6% in August from a month earlier to a seasonally adjusted annual rate of 1.665 million units, according to the Commerce Department. That was the slowest rate of starts since April 2003.

Growth in spending on remodeling has also slowed recently, a result of rising interest rates and homeowners who have postponed selling, along with presale renovations. According to the most recent data from Harvard University's Joint Center for Housing Studies, spending on home remodeling rose just 2.8% in the 12-month period ending in June, compared with the frenzied 20% increase in 2004. Still, spending on home remodeling, maintenance and repairs totaled $215 billion in 2005, up from $199 billion in 2004, according to the most recent annual data from the Census Bureau.

The new environment means that homeowners are more likely to find contractors willing to take on projects quickly. "Rather than saying 'call me next spring,' they'll be more likely to say 'I'll be over this week to the talk about the project,' " says Kermit Baker, a senior research fellow at the Harvard Joint Center.

That is what Kurt and Susan Askin found this summer when they sought a bid for remodeling a bathroom in their northern Virginia home. About three years earlier, the couple redid their kitchen and had to wait a couple of months to get started. But when they decided to go ahead with the bathroom project this summer, they called the same contractor and the project was under way in two weeks.

"I was certainly pleasantly surprised," says Ms. Askin, a retired accountant.

Their contractor, Don Sever, the owner of Sever Construction, in Oakton, Va., says he sees interest in remodeling starting to ease. He has trimmed prices by about 5% to attract more business. "People are much more cautious about spending that home-equity money," he says.

Economists caution that people should only invest in their home if they are planning to stay awhile and enjoy it. With home prices starting to fall, owners may not see the same, hefty return on their investment that renovations have brought in the past several years.

"It's a riskier proposition to fix it up for a buyer," says Mr. Simonson of the Associated General Contractors of America.

There are also risks in hiring a new-home builder who doesn't have remodeling experience, building experts say. On the surface, the required skills may seem the same, but staffers that work on new homes tend to have specific skills, such as roofing or framing, and managers may not be versed in the challenges and costs associated with reconfiguring an existing kitchen. Remodelers, they say, are better-suited to coordinate all the details of project, from putting up wallboard to installing faucets.

Longtime remodelers also warn that new-home builders may not be accustomed to interacting frequently with clients. While builders may be used to working on their own in an empty house, remodelers must be in a home for weeks at a time while their clients are living there.

"It takes a different kind of person," says Mr. Sever, the Oakton, Va., remodeler. "You need to put up tarps, clean up and not set tools on a customer's dresser."

Scott Sevon is a custom builder and remodeler in the Chicago area who has recently taken on more remodeling projects. He says he has made his staff aware that remodeling "is a lot more time and hand-holding and lot of good communication skills." As one way to demonstrate their responsiveness, he gave all of his staff Blackberry e-mail devices so clients can get in touch at any time.

Despite possible drawbacks, some clients say hiring custom builders for remodeling projects is a plus. When Bruce Ash wanted to do a large-scale renovation at his Tucson home, he wasn't sure if a traditional remodeler would have the attention to detail required to mimic the Arts and Crafts style he and his wife envisioned. They wanted mahogany wainscoting in a specific pattern and custom-made doors that were modeled on an old house in Wisconsin. He found Mr. Fink of Becklin Construction to take on the $700,000 project. It was one of Mr. Fink's first major remodeling projects.

"Guys who are used to commissioning million-dollar houses are going to be attuned to a whole different level of detail," says Mr. Ash, a real-estate manager. "Normally, the market has been such that we could never get custom builders to remodel homes, but now, they are interested."